Divisional Performance Evaluation
Overview:- Most large Organisations adopt divisionalised structures. The manner in which divisional performance is controlled and measured is, therefore, of particular importance. A central issue of performance reporting is whether divisional managers should be held accountable for items that they cannot influence by their actions. The conventional wisdom of management accounting, as reflected in textbooks, advocates that the evaluation of a manager’s performance should consist of only those factors under a manager’s control. Therefore, divisional managerial performance measures should include only the items controllable by divisional managers. Or, performance measurement should
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This knowledge is difficult or impossible to aggregate; time and place by their very nature are destroyed by aggregation. Specific knowledge is also often obtained at low cost by individuals in an organization as a byproduct of other activities, for example, the idiosyncratic knowledge about a machine that its operator gains over time. Prices and quantities are examples of general knowledge that are easily aggregated and are inexpensive to transmit among agents.
Achieving effective utilization of information in decision-making is a major problem in organizations. The literature in computers and information systems views the problem as one of finding ways to transfer knowledge relevant to a decision to the agents involved in the decision. This makes sense when the knowledge is general or when the problem is one of discovering new techno logy that will convert specific to general knowledge. When the relevant knowledge, however, is specific, and when the technology (for example, in computing and communications) is unable to lower the cost of transfer substantially, this approach will fail.
The alternative to moving the knowledge is to move the decision rights to those agents who possess the relevant specific knowledge. The cost incurred in this approach to the problem is the cost engendered by the fact that people are self- interested. Therefore, as the decision rights are partitioned out among agents in the
Also information systems assist with making decisions and business processes by formulating strategic plans and make decisions for the organisation longevity and prosperity. Additionally information systems add controls to employee processes, ensuring
Information Management has to do with capturing information, efficient planning, organizing and evaluating the information to interpret for an organization to make well informed decisions. (Hinton, 2006) The main reason organizations depend on information is to improve its overall management in
1. “The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess (H.3)”
Conclusion: As such, the MCS should have been initially detailed using this reverse order for consistent presentation as well as acting as a catalyst to the planning subsystem of the core control system. In doing so, goals can be set in accordance to the company culture and structure. This enables management to influence the behaviour of more employees by providing clear goals. This makes for a better feedback system because it includes the information of the various departments/divisions and all levels of employment. This allows for attainable goals and prevents the imposition of unrealistic goals, MBO, and the likelihood of fraudulent reporting. To further prevent fraudulent reporting, the measurement subsystem should rely equally on the accounting system as well as non-financial measures (balanced score card).
Informed decision-making is an important aspect for working in the government. According to Milakovich and Gordon, provide some examples of how information technology can be used to assist bureaucrats in decision-making?
The balanced scorecard does not focus solely on achieving financial objectives but also highlights the non-financial objectives .It balances the use of financial and non-financial performance measures to evaluate short-run and long-run performance in a single report . And this is problems faced by Norwalk Division managers. They complained about the continual pressure to meet short-term financial objectives in business that required extensive investments in risky projects to yield long-run returns. Furthermore, the Division-business strategy mentioned in Exhibit 1is not clearly and detailed enough for the whole company ,which is quite simple style and without a clear “quantitative data” as an objective ,it is difficult to communicate to employees and achieve the goals setup by headquarters.
Brian, this is your annual performance evaluation report for the period of August 01, 2015 to July 31, 2016. During this time you worked as a Tax Program Technician I (TPTI) in the Collection Account Resolution Services Group C (CARS – C) of the Advisory, Analysis, and Services Bureau (AASB).
Informed decision-making is an important aspect for working in the government. According to Milakovich and Gordon, provide some examples of how information technology can be used to assist bureaucrats in decision-making?
Managerial accounting underlines on future choices and it is not an obligatory practice. It gives data to the association's insiders in connection with performance assessment, inspiration, course and control. The opportuneness of report is a noteworthy prerequisite and accentuation are set on the significance of things in choice making (Needles, Powers and Crosson, 2010). Administrative bookkeeping gives a report on clients, items, workers and divisions. Also, it is not an absolute necessity for administrative bookkeeping to take the proper accounting rules.
Economists have often modelled human decision makers as completely rational. According to this model, rational people know their own preferences, gather and accurately process all relevant information, and then make rational choices that advance their own interests. However, Herbert Simon won a Nobel Prize in economics by pointing out that people are rational, but only boundedly so in that they seldom gather all available information, they often do not accurately process the information
1. “The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess (H.3)”
Buckley and Casson proposed that knowledge is a public good and hence can be transferred easily across the world. The basic assumption about this is that they consider everybody should have equal knowledge. They also stressed on the point that information is important as well and the cost related with information is a handicap for the firm.
It is generally accepted that information is a vital commodity for the successful operation of today’s organizations. Nowadays modern business organizations are using computerized information systems in order to obtain such information. However as the technology advances rapidly the main issue is how can an organization should effectively use such an information system - which its management sometimes can be unpredictable - in order to effectively help the whole organization structure to improve and take the most out of it.
Owing to limited rationality of man, Herbert Simon contends that most decisions are based on limited rationality, that is, the organization is working like a brain. It would be impossible for organizations to attain perfection since their members have limited information-processing abilities (Morgan, G, 1997)
14-1: “Standard Costing Is Alive and Well at Parker Brass” by D. Johnsen and P. Sopariwala, Management Accounting Quarterly (Winter 2000), pp. 12-20.