Professional Documents
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Accounting Information System 1 - Ais20103
Accounting Information System 1 - Ais20103
Contemporary approaches to
measuring and managing
performance
(cont.)
Copyright © 2012 McGraw-Hill Australia Pty Ltd
PowerPoint slides to accompany Management Accounting: Information for managing and creating value 6e
14-2
Slides prepared by Kim Langfield-Smith
Outline (cont.)
• The balanced scorecard (BSC)
– The four perspectives
– Strategy maps
– Causal linkages within an SPMS
– How successful are BSC?
• Does non-financial performance lead to financial
performance?
• Benchmarking
• Designing contemporary performance
measurement systems
– Designing measures for continuous improvement
(cont.)
Copyright © 2012 McGraw-Hill Australia Pty Ltd
PowerPoint slides to accompany Management Accounting: Information for managing and creating value 6e
14-7
Slides prepared by Kim Langfield-Smith
Non-financial measures for
operational control (cont.)
• Stock status
• Accident report
– Safety statistics
• Multi-skilling
– Number of employees who have attained skills to allow
them to undertake a range of operational tasks
• Machine downtime
– Number of hours (or percentage of total production hours)
that machines are unable to operate
• Delivery on time
– Prompt delivery to customers is an important driver of
customer value
(cont.)
Copyright © 2012 McGraw-Hill Australia Pty Ltd
PowerPoint slides to accompany Management Accounting: Information for managing and creating value 6e
14-8
Slides prepared by Kim Langfield-Smith
Non-financial measures for
operational control (cont.)
• Productivity
– The ratio of outputs produced per unit of input
(cont.)
Copyright © 2012 McGraw-Hill Australia Pty Ltd
PowerPoint slides to accompany Management Accounting: Information for managing and creating value 6e
14-12
Slides prepared by Kim Langfield-Smith
The balanced scorecard (BSC)
(cont.)
Copyright © 2012 McGraw-Hill Australia Pty Ltd
PowerPoint slides to accompany Management Accounting: Information for managing and creating value 6e
14-13
Slides prepared by Kim Langfield-Smith
The balanced scorecard (cont.)
– Plan and undertake initiatives and activities to implement
the chosen strategies to support the achievement of the
objectives
– Generate reports to monitor and manage actual
performance against targets for units and the
organisation as a whole; assign units and personal BSCs
to specific managers to enhance accountability and
improve performance
(cont.)
Copyright © 2012 McGraw-Hill Australia Pty Ltd
PowerPoint slides to accompany Management Accounting: Information for managing and creating value 6e
14-15
Slides prepared by Kim Langfield-Smith
The four perspectives of the BSC
(cont.)
• Internal business processes
– Objectives relate to specific processes that contribute to
customer and financial objectives
– Measures of cost, product quality, time-based measures,
new product development
• Learning and growth
– Focus is on the capabilities of the organisation to
achieve superior internal processes that create both
customer and shareholder value
– Delivers long-term growth and improvement
– Measures focus on employee capabilities, capabilities of
information systems and organisational climate
(cont.)
Copyright © 2012 McGraw-Hill Australia Pty Ltd
PowerPoint slides to accompany Management Accounting: Information for managing and creating value 6e
14-16
Slides prepared by Kim Langfield-Smith
The four perspectives of the BSC
(cont.)
(cont.)
Copyright © 2012 McGraw-Hill Australia Pty Ltd
PowerPoint slides to accompany Management Accounting: Information for managing and creating value 6e
14-18
Slides prepared by Kim Langfield-Smith
Strategy maps (cont.)
(cont.)
Copyright © 2012 McGraw-Hill Australia Pty Ltd
PowerPoint slides to accompany Management Accounting: Information for managing and creating value 6e
14-21
Slides prepared by Kim Langfield-Smith
Causal linkages within an SPMS
(cont.)
• SPMS may rely on cause and effect linkages
between measures in different perspectives
• In practice
– Not all organisations use lag and lead indicators
– Lag indicators may be called outcome measures or key
performance indicators (KPIs)
– Lead indicators may be called driver measures or key
performance drivers (KPDs)
– Some organisations identify and measure critical
success factors (CSFs)
– The number and types of perspectives in BSCs will
differ across organisations
(cont.)
Copyright © 2012 McGraw-Hill Australia Pty Ltd
PowerPoint slides to accompany Management Accounting: Information for managing and creating value 6e
14-22
Slides prepared by Kim Langfield-Smith
Causal linkages within an SPMS
(cont.)
(cont.)
Copyright © 2012 McGraw-Hill Australia Pty Ltd
PowerPoint slides to accompany Management Accounting: Information for managing and creating value 6e
14-28
Slides prepared by Kim Langfield-Smith
Benchmarking against competitors’
cost structures (cont.)
(cont.)
Copyright © 2012 McGraw-Hill Australia Pty Ltd
PowerPoint slides to accompany Management Accounting: Information for managing and creating value 6e
14-30
Slides prepared by Kim Langfield-Smith
Designing contemporary
performance measurement
systems (cont.)
• Be timely
– Measures reported as close as possible to the period to
which they relate
• Include benchmarking
– Against external standards
• Embrace participation and empowerment
– To promote motivation and goal congruence
• Include only a few performance measures
– Rule of thumb is that no person should be responsible
for more than four or five measures
(cont.)
Copyright © 2012 McGraw-Hill Australia Pty Ltd
PowerPoint slides to accompany Management Accounting: Information for managing and creating value 6e
14-31
Slides prepared by Kim Langfield-Smith
Designing contemporary
performance measurement
systems (cont.)
• Link to rewards
– Motivational
• Include non-financial and financial measures
• Have a strategic orientation—directly measure
areas that provide competitive advantage
• Use external benchmarks
• Emphasise continuous improvement