Chapter 14

• Perfomance Evaluation 


  Process where manager at all level gain information about performance of task within firm and judge the performance
• Performance Evaluation 


  Management Level evaluate operating level
• Management Control


  Evaluation of upper level managers mid-level managers
• Operation Control


  Mid level manager evaluate operating level of employees
• Objective of Management Control

  • Motivate manager to exert higher effort to achieve goals
  • Provide incentives for managers make decisions consistent to company goals
  • Determine fair reward based on effort, skills and effective to decision making
• Strategic Investment Unit (SIU) 


  Also knowns as Responsibility Center
• Strategic Investment Unit 


  distributed unit of organization to the managers who hold accountable to its operation and resources
• Performance Evaluation and Control

  each manager held responsible for the deviation on budgeted goals and actual result
• Strategic Performance Measurements 


  Known as responsibility accounting used by top management to evaluate SIU managers
• Strategic Performance Measurements 


  Used when SIU managers effectively delegate their responsibility

  adequate measure to evaluate manager performance
• Decentralization Organization 


  Decision making not confined to top management rather spread throughout organization
• Decentralization Organization 


  It is where manager had key operating decision relate to sphere of responsibility
• Segment reporting 


  Cost and revenue assigned to segment enable management see responsibility lies for control purpose and measure perfomance of segment manager
• Segment Reporting 


  A greatest value of organizing that is decentralized
• Effective Strategic Perfomance 1.Well defined organization structure.

  • Organization chart must be clear established and understood
  • Manager financial responsibility must be stated in advance
  • Vital for decision making is control perfomance evaluation and control achieve firm intended purpose
• Effective Strategic Perfomance

  2. Well defined and established standard of performance revenue, cost and investment

  • Integrated plan for the control of operation provide for cost standard, expense, budget, sale forecast etc.
• Effective Strategic Perfomance

  3. System of accounting identifies revenue, expenses and asset to specific unit of org.
• Effective Strategic Perfomance 


  4. System provide preparation of regular perfomance reports

  • Requires system prepare regular segment show planned result, actual result and variances.
  • Include item that is controllable by the manager
  • Highlight items requiring management action
• Strategic Business Unit (SBU's ) 


  Unit within organization that has control over cost, revenue, profits and investment funds
• Cost SBU

  • manager responsible for minimizing cost subject to some output
  • No control over generating revenue and use of investment
• Manager of Cost SBU

  • Responsible for making projection or budget of cost in unit based on expected level of operation
• Performance of Cost SBU

  evaluate using perfomance report or variance analysis report based on standard cost and flexible budget
• Variance

  Difference between cost SBU that reported. If significant, will be analyzed