08 Fall 08 Fall 1. Evaluate the decision to use “minimum performance standard “ (MPS) targets instead of “stretch” targets. We evaluate the decision to use “minimum performance standard” targets by looking at how good this new target system achieves the four purposes of planning and budgeting processes. First of all, planning and budgeting processes have to enhance management control. Derived from the case, we think corporate managers have too much control on the targets. General managers give corporate managers an estimate of the targets they can achieve but in all the divisions, targets were adjusted. The CEO always has the last call on the targets and in the case of Sealtron we see that this isn’t good. No one believes Sealtron can …show more content…
Even worse, the manager of Hermetite, an optimistic person, would like to set high standards in order to achieve high performance. He was upset with the new MPS philosophy, which forced him to accept a cut budget. And different from the “stretch” budgeting, which encouraged employees to achieve as high targets as they could, the most important motivation for employees in the MPS system is to keep their jobs. For Hermetite, which owned a huge potential and infinite future growth, the former system would have been better. To conclude, Glasseal suited the MPS philosophy best. Hermetic Seal and Sealtron would also perform a relatively positive change in the MPS system. But “stretch” budgeting is better for Hermetite than MPS. 3. What, if anything, could have been done to improve the implementation of the new philosophy? In order to provide a schematic response to this question, we return to the structure used to provide an answer to question one, being the four purposes of planning and budgeting processes. The first purpose is to enhance management control. With regard to the implementation of the new system, the amount of management control exercised has altered quite ambiguously. On the one hand, the creation of the bonus pool has augmented the amount of decentralized control to the division managers. This was mainly a result of the critique that there was always substantial delay with regard to payments of the bonuses. However, in its current
1. Evaluate the decision to use “minimum performance standard” (MPS) targets instead of “stretch” targets
Firstly, the president and other management team members may get a higher overall salary by putting next year’s revenue to this year and transferring current year expenses to next year. The division’s management team’s salary and bonus may be based on the earnings of the division. By increasing revenue and decreasing expenses, they will be able to fake a higher operating income and thus receive higher compensation.
Control is typically last in the list of management functions and follows planmng, organi7ing, staffing, and directing. In many ways, controlling is the most important, but it cannot occur until the results of the first four have been implemented. Managers control to ensure that the expected results actually occur after a structure or task is integrated with technology or people. Control depends on information conveyed to managers who continuously monitor sensors to ensure that ind1\ 1dual work results are effective and desirable and that organization objective are accomplished within resource con traints. The management model in Figure 5.8 reflects these relationships. Control allows managers
Performance standards should be objective, measurable, realistic, and stated clearly. The standards should be written in such a way that will be used to assess performance.
In too many organizations the production of results compared to budget is seen as the end of the process. If no action is taken on the basis of management accounts then there is little point in producing them and even less point in wasting management time discussing them.
RAH Industries has the following financial statements for 2014 and 2015. RAH’s stock has no par value. The firm paid a dividend in 2015 of $500 million. Long-term debt of $150 million was retired in 2015. RAH also issued stock and long-term debt in 2015. There are 4 questions. Show your work in arriving at your answers. Assume RAH uses these statements for both financial reporting and tax purposes and that it sold no assets during 2015. Compute the cash flows for 2015 using (1) the financial statement of cash flows with notes payable as financing liability (i.e., included in the concept of Net Operating Working Capital) (2) the accounting statement of cash flows, also with notes payable as financing liability, as above. (3) Write a paragraph
In the early 2000’s, Engstrom developed a major issue with financial logistics. The inability to pay bonuses to hard working employees (most who had relied on them as a regular part of their paychecks since the Scanlon plan’s institution in the 1990s) resulted in damaged morale and decreased productivity (Beer, 2008). Ultimately, utilizing monetary praise as a lone symbol of employee value accelerated any negative impacts due to the outdated Scanlon plan or the economic downturn.
By contrast, the new budget system is based on a minimum performance standard (MPS philosophy) which has to be reached in order to start earning extra rewards, trying at the same time to ensure that these standards are realistically set by the division managers making them definitely achievable. Then, above this first and sure performance standard, managers have to set targets that represent ordinary performance levels with a 50% probability of achievement.
* unity of purpose and focus under a common corporate strategy (further supporting the firm’s strategy as it relates to acquisitions and divestitures);
An effective business strategy and budgeting is very essential in a manufacturing industry. A company without a proper business strategy and master budgeting plan would usually faces tremendous challenges and losses during its business operations. The importance of company’s business strategies and budgeting plans, as well as the challenges and losses in the absence of these items has clearly presented in this case study. (“Wiley,” 2013)
The LAMSS and ABC project team members will discuss the project overall requirements and technology expectations, and develop a set of technology/system performance requirements. The specific objective for conducting the project is to provide ABC decision-makers with subjective (employee feedback) and objective (technology performance) information on the viability of the equipment under test to meet current ABC operational needs.
There is always no guarantee that the management control system design and implementation of the top management will always be effective as they, just like any other functions in an organization do face numerous challenges. These management controls are always designed in such a way as to enable continuous monitoring of the involved control activities as this helps identify and provide feedback on the effectiveness of these control systems (Rangaraju
Budgetary controls are a means to maintain some kind of order within a business. Of course, there are various options when it comes to budgetary controls. This writer will be reflecting on Ammons (1999) article, which provides a brief history of benchmarking during the 1970’s and 80’s to how it has influenced change today (Ammons, 1999). However, this writer will be focusing on benchmarking and how such a method can be considered to be a control, yet also has weaknesses or limitations that it may not account for. This writer will be indicating how benchmarking applies to McDonalds Corporation and whether if it is helpful or not. Lastly, this writer will be discussing simple balance sheets, profit and loss, and financial ratios statement (Bateman & Snell, 2013). All of the concepts mentioned play an important part in budgetary control and apply to McDonald 's corporation. As many individuals have found out through the years having a system in place such as checks and balances, ensures that everyone is within compliance.
The final decision rests in the hands of the president and the executive vice president, and finance rarely offers any dissenting opinion. Although it can be argued that these matters merit the close attention of and should ultimately be decided on by top management, the group suggests the empowerment of the vice president for finance, for the sole reason that his staff has probably the greatest amount of coordination to do insofar as the company’s operating divisions are concerned. As such, the head of the finance staff is in a better position to make truthful recommendations or offer noncompliant opinions as he/she works closer with each of the operating divisions for the most part. Moreover, financial issues should be the primary concern of the vice president for finance, as he is after all, being evaluated based on how successfully the financial resources of the company are being managed to achieve its purposes. The budgeting system, may therefore be designed as follows:
Managing companies in the 21st century has changed in many ways compared to the managing system used in the olden days. Starting from the structure of the organization itself, how they plan, how they make decision, up until how they doing things; but one thing that has not changed is that organizations which perform with an outstanding result never neglect their planning. Each organization competes with each other to perform better in accordance to others. These changes are made in order to form a better organization each day as well as better results at the end of all progress. This essay will examine why organizations that fail to plan are in essence planning to fail, as well the types of organizational plans; hence the