Scorecard, Managerial Accounting


The traditional approach to the monitoring organizational performance has focused on the financial measures and the outcomes. Increasingly, companies are realizing that these measures alone are not sufficient enough. For one thing, such measures report on what has occurred and might not provide timely data to respond aggressively to the changing conditions. In addition, lower-level personnel may be too far to be removed from an organization's financial outcomes to care. As a result, numbers of companies have developed more involved scoring the systems. These scorecards are custom tailored to each position, and draw the focus on evaluating elements which are significant to the organization and under the control of the employee holding that position. For example, a fast food restaurant would want to evaluate response time, waste, cleanliness, and similar elements for the front-line employees. These are the elements for which employee would be responsible; presumably, success on these points translates to eventual profitability.

Balance -- When controlling by means of a scorecard approach, the process should be cautiously balanced. The goal is to identify and focus on the components of performance which can be measured and improved. In addition to the financial outcomes, these components can be categorized as relating to the business processes, the customer development, and the organizational betterment. Processes relate to items such as delivery time, percent of defect free products, machinery utilization rates and so forth. Customer issues involve frequency of repeat customers, results of the customer satisfaction surveys, customer referrals, and many more. Betterment pertains to items such as employee turnover, hours of the advanced training, mentoring, and other similar objects. If these balanced scorecards are cautiously developed and implemented, they can be useful in furthering the goals of the organization. On the other hand, if the elements being evaluated do not lead to enhanced performance, the employees will spend time and energy pursuing tasks/works that have no linkage to creating the value for business.

Improvement -- TQM is acronym for the entire quality management. The goal of the TQM is continuous improvement by focusing on the customer service and systematic problem solving by means of teams made up of front-line employees. These teams will be benchmark against successful competitors and the other businesses. Scientific methodology/terminology is used to study what works and does not work, and best practices are implemented within an organization. Usually, TQM-based improvements represent incremental steps in shaping the organizational improvement. More sweeping alter can be implemented by the complete process reengineering. Under this approach, the whole process is mapped and studied with the goal of identifying any steps which are unnecessary or which do not add value. Additionally, such comprehensive revaluations will, many times, identify bottlenecks which constrain the whole organization. Under theory of constraints (TOC), efficiency is improved by seeking out and eliminating the constraints within organization. For instance, an airport might find that it has sufficient security processing, runways, luggage handling, etc., but it may not have sufficient gates.

The whole airport could function more effectively with the adding of a few more gates. Similarly, most businesses will have one or more activities that can cause a slowdown in the whole operation. TOC's aim is to find and eliminate the particular barriers.

So far, this chapter has given us snippets of how managerial accounting supports organizational directing, planning, and controlling. As you can tell, managerial accounting is surprisingly wide in its scope of the involvement. Before looking at these topics in extra detail in successive chapters, become familiar with some of the key managerial accounting jargon and the concepts. The remainder of this topic is devoted to that task.

Posted Date: 7/21/2012 3:30:11 AM | Location : United States

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