Term
| responsibility accounting |
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Definition
| allows each component of the organization to be judged on the achievement of its own goals. |
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Term
| responsibility center & incentives |
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Definition
The performance of a responsibility center must be evaluated base on appropriate criteria.
Marketing incentives and executive compensation must be designed to inspire improvement in these criteria. |
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Term
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Definition
| accounting report that connects the firm's critical success factors to measurements of its performance; tool for ensuring that the organization does not lose sight of some objectives in the pursuit of others. |
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Term
| business process innovation & quality |
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Definition
Business processes have been the subject of much practical and theoretical innovation in recent years, along with tools for monitoring the efficiency of these processes.
Quality has been an area of management scrutiny since the 1980s; its costs can be quantified, and frameworks have been developed for regulating the pursuit of quality. |
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Term
| one of a manager's most important tasks |
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Definition
| monitoring of progress toward the completion of an individual project. |
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Term
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Definition
| decision making is consolidated so that organization activities may be more effectively coordinated from the top |
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Term
| decentralized organization |
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Definition
| decision making is at the lowest level possible. The premise is that the local manager can make more informed decisions than a manager further from the decision. |
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Term
| responsibility centers/strategic business units (SBUs) |
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Definition
| decentralized organization is divided into SBUs |
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Term
| four types of SBUs (CRIP) |
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Definition
| cost center, revenue center, investment center, profit center |
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Term
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Definition
| Disadvantages of a cost center are the potential for cost shifting, and that long-term issues may be disregarded, allocation of service department costs to cost centers. |
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Term
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Definition
| sales department, is responsible for revenues only. Revenue drivers are the only important measure. |
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Term
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Definition
appliance department in a retail store- responsible for both revenues and expenses
permits an evaluation of performance that can be compared with that of other responsibility centers or other potential investments on an ROI basis. |
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Term
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Definition
| branch office; responsible for revenues, expenses, and invested capital |
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Term
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Definition
| usually are cost centers; service centers exist to provide support to other organizational subunits. |
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Term
| How are responsibility centers structured? |
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Definition
structured such that a logical group of operations is under the direction of a single manager.
Measures are designed for every responsibility center to monitor performance. |
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Term
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Definition
| the performance measures on which the manager's incentive package are based must be under the manager's direct influence. |
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Term
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Definition
factors that a manager can influence in a given time period.
Along with the responsibility, a manager must be granted sufficient authority to control those factors on which his/her incentive package is based. |
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Term
| Are all controllable costs variable costs? |
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Definition
| Controllable costs is not synonymous with variable cost; this classification is particular to the level of the organization. |
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Term
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Definition
| these performance measures must be designed such that manager's pursuit of them ties directly to accomplish the organization's goals. |
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Term
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Definition
| results when segments of the organization pursue goals that are in that segment's own best interests rather than those of the organization as a whole. |
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Term
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Definition
| costs of products, activities, facilities, services, or operations shared by two or more cost objects. |
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Term
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Definition
| frequently used to describe the common costs of a single process that yields 2+ join products |
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Term
| Are joint costs direct or indirect? |
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Definition
| Indirect costs, so direct cause-and-effect relationships are not discernible. Such a relationship promotes acceptance of common cost allocation by managers who perceive fairness of the procedure. |
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Term
| What is the most important attribute of management reporting? |
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Definition
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Term
| financial measures of responsibility centers |
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Definition
cost centers- var. costs and total costs
revenue centers- gross sales and net sales
investment centers- ROI, residual income, ROA, ROCE, ERORC, EVA
Nonfinancial performance measures are not standardized.
profit centers- sales, gross margin, operating income |
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Term
| impact of marketing practices on performance |
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Definition
If an overall goal to gain market share has been set, prices will likely be cut to such a degree that gross margin is negatively affected. Profit center managers in these situations should be evaluated based on sales results, not margins.
Also, amount of flexibility granted to salespeople in matters of price affects margin and operating income.
Highly centralized marketing increases the difficulty of tracing marketing costs to profit centers. |
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Term
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Definition
| base pay; contractually obligated to be paid for effort and not affected by outcomes |
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Term
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Definition
medical insurance, life insurance, and paid vacation
Executives, however, must motivate all employees to pursue the center's goals.
Incentive provided to an executive must be commensurate with the effort required.
Perquisites = perks. |
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Term
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Definition
Bonuses for the highest executives of the enterprise are generally tied to the stock price. ROI and residual income may also pay a role.
For profit centers, operating income is the most appropriate basis for executive bonus.
Ideally, these components are structured to motivate the executive toward the goals of his/her responsibility center, which are in turn aligned with those of the enterprise. |
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Term
| trend in performance evaluation |
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Definition
| balanced scorecard approach to managing the implementation of the firm's strategy. |
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Term
| critical success factors (CSF) |
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Definition
| specific, measurable financial and nonfinancial elements of a firm's performance that are vital to its competitive advantage. |
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Term
| Multiple measures of performance... |
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Definition
| Multiple measures of performance permit a determination as to whether a manager is achieving certain objectives at the expense of others that may be equally or more important. |
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Term
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Definition
| determines a method of carrying on a business function or process that is considered to be superior to all other known methods. |
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Term
| How does a firm identify its CSFs? |
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Definition
| By means of a SWOT analysis. |
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Term
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Definition
| functions the firm performs especially well; these are the basis for its competitive advantages and strategy. |
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Term
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Definition
| output and financial measures |
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Term
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Definition
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Term
| A typical balanced scorecard classifies objectives into one of four categories: |
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Definition
| financial, output, learning and growth, functionality |
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Term
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Definition
| sales, fair value of firm's stock, profits, and liquidity. |
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Term
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Definition
| customer satisfaction, dealer and distributor relationships, marketing and selling performance, prompt delivery, and quality. |
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Term
| learning and growth & CSFs |
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Definition
| development of new products, promptness of their introduction, HR development, morale, and competence of the work force. |
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Term
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Definition
| each objective associated with one or more measures that permit the organization to gauge progress toward the objective. |
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Term
| process-management-driven business |
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Definition
Management concerns itself with the effective and efficient carrying out of the predefined business processes.
If processes have been designed correctly, organization's goals should be accomplished. |
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Term
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Definition
| centralized with an emphasis on service centers so that employees are incentivzed to meet customer needs |
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Term
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Definition
| By contracting with outside services that provide HR, payroll, and information services, the organization may find that it can gain cost savings and no longer has to worry about knowledge drain when key employees leave. |
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Term
| outsourcing disadvantages |
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Definition
| loss of core knowledge, loss of control over the outsourced function, unexpected costs, challenges of contract management. |
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Term
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Definition
| cost advantages, but effects of currency exchange rate fluctuations and the possibility of political instability must be considered |
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Term
| business process reengineering (BPR) |
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Definition
complete, bottom-up revision of the way an organization carries out a particular business process.
BPR is not kaizen, automation, or a paradigm shift. |
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Term
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Definition
| gradual, incremental streamlining of existing procedures |
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Term
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Definition
| movement from manual processes to computers |
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Term
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Definition
| change in the nature of business itself |
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Term
| How are BPR initiatives measured? |
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Definition
| in terms of increased efficiency or redundant jobs eliminated. |
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Term
| Are BPR initiatives often successful? |
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Definition
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Term
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Definition
| goal is a smooth, rapid flow of work through the system. |
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Term
| subgoals of lean operation |
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Definition
| eliminate disruptions, system flexibility, and eliminate waste (including inventory) |
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Term
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Definition
| ombines knowledge of RM and WIP inventory levels with customer demand to maximize use of the firm's productive capability (maintain continuous production flow) |
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Term
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Definition
| process is best improved by focusing on the slowest part of the process (the constraint/bottleneck). Increasing the efficiency of non-constraints merely creates backup in the system. |
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Term
| steps in TOC Analysis (IDMIR) |
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Definition
Identify constraint
Determine most profitable product mix given constraint
Maximize flow through constraint
Increase capacity at the constraint
Redesign the mfg. process for greater flexibility and speed |
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Term
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Definition
| contribution margin (CM) through the constraint; must be maximized in order to maximize short-term profits |
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Term
| Which products should be produced? |
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Definition
| The products with the highest TM/unit, not the highest CM/unit. Also, the product that has the highest TM/unit of time. |
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Term
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Definition
goal is to reduce number of defects in mass-production process.
6 standard deviations encompass 99.99966% of data- the desired rate of no defects. |
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Term
| executives (in six sigma) |
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Definition
| Executives must be committed and empower those who can successfully implement Six Sigma. |
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Term
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Definition
| responsible for overseeing Six Sigma implementation across the enterprise |
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Term
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Definition
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Term
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Definition
| oversee particular Six Sigma projects |
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Term
| green belts and yellow belts |
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Definition
| do Six Sigma work in addition to their regular job duties; they are closest to the production processes being improved. |
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Term
| statistical control charts |
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Definition
| graphic aids for monitoring the status of any process subject to acceptable or unacceptable variations during repeated operations |
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Term
| control charts have three lines |
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Definition
center line- overall mean or average range for the process being controlled.
Other two lines are upper control limit and lower control limit. |
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Term
| How are processes measured with the control charts? |
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Definition
Processes are measured periodically, and the values (X) are plotted on the chart.
If value falls within control limits, no action is taken.
If value falls outside limits, result is abnormal, process is considered out-of-control, and an investigation is made for possible corrective action. |
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Term
| What can be concluded from charts? |
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Definition
| Charts make trends and cycles visible, but not the cause of variation. |
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Term
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Definition
| bar charts that assist management in quality control analysis |
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Term
| How do managers use pareto diagrams? |
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Definition
Managers optimize their time by focusing their effort on the handful of areas from which most defects arise.
Independent variable- X axis- factor selected by manager as area of interest.
Dependent variable- Y axis- frequency of occurrence of defect
The occurrences of the ind. variable are ranked from highest to lowest, allowing the manager to see at a glance which areas are of most concern. |
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Term
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Definition
| similar to Pareto diagram, but they display a continuum for the independent variable |
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Term
| Fishbone/cause-and-effect diagrams (HOPS) |
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Definition
TQM process improvement technique useful in studying causation (why actual and desired situations differ)
Head of skeleton represents statement of problem.
Organizes the analysis of causation and helps to identify possible interactions among causes.
Principal classification of causes are represented by lines (bones) drawn diagonally from the heavy horizontal line (spine).
Smaller horizontal lines are added in their order of profitability in each classification. |
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Term
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Definition
| involves analysis and measurement of key outputs against those of the best organizations; also involves identifying the underlying key actions and causes that contribute to the performance difference |
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Term
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Definition
recognized by authorities in the field and by customers for generating outstanding results; they are generally innovative technically or in their management of HR.
Constant benchmarking occurs. |
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Term
| kinds of benchmarking (PICS) |
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Definition
Process (function)- studies operations of organizations with similar processes regardless of industry.
This method may introduce new ideas that produce a significant competitive advantage.
Internal- application of best practices in one part of the organization to its other parts
Competitive- studies organization in the same industry
Strategic- search for successful competitive strategies |
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Term
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Definition
must be assessed in terms of relative costs and benefits. Thus, an organization should attempt to minimize its total quality costs.
Emphasis on quality improves competitiveness, enhances employee expertise, and generates goodwill. |
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Term
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Definition
| costs of prevention and costs of appraisal, which are financial measures of internal performance |
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Term
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Definition
| attempts to avoid defective output. Costs include preventive maintenance, employee training, review of equipment design, and evaluation of suppliers |
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Term
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Definition
| embraces such activities as statistical quality control programs, inspection and testing. |
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Term
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Definition
| include internal failure costs (internal performance) and external failure costs (customer satisfaction) |
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Term
| Total Quality Management (TQM) |
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Definition
pursuit of quality in every aspect of organizational activities through a philosophy of doing it right the first time, employee training and empowerment, promotion of teamwork, improvement of processes, and attention to satisfaction of customers, both internal and external.
TQM recognizes that quality improvement can increase revenues and decrease costs significantly.
The management of quality is not limited to quality management staff, engineers, and production personnel, but extends to all within the organization. |
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Term
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Definition
| executive-level quality council, quality training for managers, quality audit to evaluate information gathering, benchmark, and identify best improvement opportunities, gap analysis, strategic quality improvement plans, employee training, quality teams, measurement and goal setting, compensation, appraisal and recognition and reviewing and revising the whole effort periodically. |
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Term
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Definition
family of 11 standards and technical reports that provide guidance for establishing and maintaining a quality management system (QMS).
Standards must be revised every 5 years. |
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Term
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Definition
| The intent of the standards is to ensure the quality of the process, not the product. The marketplace determines whether a product good or bad. |
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Term
| basic requirements of an ISO QMS |
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Definition
Key processes affecting quality must be identified and included. A process management approach must be used.
General requirements- the entity must have a quality policy and quality goals. It also must design a QMS to control process performance. Quality goals are measurable and specific.
QMS documented in the quality policy, quality manual, procedures, work instructions, and records.
Management responsibility- management reviews the quality policy, analyzes data about QMS performance and assesses opportunities for improvement and the need for change.
Management ensures that systems exist to determine and satisfy customer requirements.
Resource management- resources needed to improve the QMS and satsify customer requirements must be provided.
Product realization processes result in products or services received by customers. These processes must be planned and controlled. Issues are means of control, objectives, documentation and records needed, and acceptance criteria.
Measurement, analysis, and improvement. The entity must have processes for inspection, testing, measurement, analysis and improvement. |
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Term
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Definition
| temporarily undertaking with specific objectives that often involves a cross-functional team and working outside customary organizational lines. |
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Term
| project management techniques |
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Definition
| designed to aid the planning and control of large-scale projects having many interrelated activities. |
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Term
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Definition
| consists of the executives who decide which projects should be undertaken. Once a project is approved, it becomes the committee's function to demand accountability regarding the project's progress. |
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Term
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Definition
| defines the project and makes the business case for it to the steering committee. |
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Term
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Definition
| oversees the day-to-day activities of the project team members and ensures that project deliverables are ready for the sponsor to present to the steering committee on time. |
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Term
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Definition
| often must continue performing their regular job duties along with their project work. Getting buy-in from immediate supervisors of project members is important. |
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Term
| 5 tasks of project management |
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Definition
| authorization, planning, implementation, monitoring, closing |
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Term
| 4 components of the risk of an unsuccessful project |
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Definition
| Ensuring resources, maintaining scope, controlling cost, providing deliverables. |
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Term
| project management triangle |
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Definition
Time, Cost, Quality. Trade-off between two inputs and the major output.
The implication is that a high-quality deliverable can only be achieved either by devoting a large number of employee hours (time) or a lot of money (cost) to the project. |
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Term
| project management software should... |
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Definition
Specify and schedule required activities
Provide the ability to do sensitivity analysis of the effects of changes in plans
Calculate a project's critical path
Establish priorities
Be able to modify or merge plans
Manage all types of project resources
Monitor progress, including adherence to time budgets for activities |
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