Chapter 19: Emerging Management Practices

1. Chapter 19:Emerging Management Practices Cost Accounting Principles, 9e Raiborn● Kinney

2. Learning Objectives • How do business process reengineering initiatives cause radical changes in the way firms execute processes? • How are competitive forces driving decisions to downsize and restructure operations? • In what ways, and why, are operations of many firms becoming more diverse? How does the increasing diversity affect the roles of the firms’ accounting systems? • Why are firms adopting enterprise resource planning systems, and how are such systems used? • What are strategic alliances, what forms do they take, and why do firms participate in them? • What are the characteristics of open-book management, and why does its adoption require changes in accounting methods and practices? • What are the three generic approaches that firms can take in controlling environmental costs?

3. Managing Change • Invest time to explain the change • Measure progress in achieving change • Communicate feedback about the success of the change process • Use business process reengineering to manage change

4. Business Process Reengineering • Examine processes to identify and then eliminate, reduce, or replace functions and processes that add little customer value to products or services • Handling or storing materials and components • Issuing checks • Packaging finished goods for shipment to customers • Recording journal entries • Developing an organizational strategic plan

5. Associated with: Radical change Employee layoffs Outsourcing Technology acquisitions Enabled by: Advanced technology Pursuit of increased quality Increase in price competition due to globalization Business Process Reengineering

6. Business Process Reengineering • Define the project • Review the business baseline • Identify opportunities • Verify the opportunities • Plan the achievement of the benefits • Review and Report

7. Downsizing • Reduces costs and improves profits in conjunction with substantial investments in advanced technology • Changes mix of inputs used to produce outputs • Increases emphasis on technology-based conversion processes • Reduces the emphasis on manual conversion processes (reduces the labor requirement)

8. Why Diversify? • Legal requirements • Business initiatives to increase opportunities for minorities • Organizational self-interest • Potential leadership resources to reach diverse groups of customers • Improve business strategy • Provide more innovation potential • Increase experience levels for projects

9. Enterprise Resource Planning (ERP) • Automate and integrate business processes • Share common data and practices across the entire enterprise • Produce and access information real-time • Link the customer end of the supply chain through production and delivery to the supplier

10. Enterprise Resource Planning • Financial professionals • Help to select and install ERP software • Analyze the data repository to support management decisions • Maintain the integrity of the data

11. Strategic Alliances • An agreement, involving two or more firms with complementary core competencies, to jointly contribute to the supply chain • Joint ventures • Equity investments • Licensing arrangements • Joint R&D arrangements • Technology swaps • Exclusive buyer–seller agreements

12. Strategic Alliances • Output produced reflects a joint effort between (or among) independent firms and the rewards of that effort are split between (or among) the allied firms • Blurs boundaries between supplier and customer • Typical strategic alliances • Exploit partner knowledge • Have partners with access to different markets • Allow sharing of risks and rewards

13. Strategic Alliances and the Finance Function • When forming a strategic alliance, finance professionals • Assess risk • Develop strategies for parent company management • Design the financial structure • Develop management control systems • Install accounting and other information systems

14. Open-Book Management Increasing a firm’s performance by involving all workers and by ensuring that all workers have access to the operational and financial information necessary to achieve performance improvements

15. Open-Book Management • Disclose financial information to all employees • Train employees to interpret and use financial information • Empower employees to make decisions • Tie a portion of employee pay to the company’s bottom line

16. Open-Book Management • Open-Book Management typically works best in the following types of firms: • Small size • Decentralized management • History of employee empowerment • Trust between employees and management

17. Environmental Issues • Measure business performance with regard to environmental issues and management of environmental costs • Span the entire value chain • Amount of scrap and by-products produced • Materials used—are they recyclable? • Actions of suppliers who produce inputs • Customer habits in consuming and disposing of products and packaging

18. Questions • How does business process reengineering affect the way that firms execute processes? • What are the benefits of adopting an enterprise resource planning system? • Why do firms form strategic alliances?

19. Potential Ethical Issues • Giving executive bonuses combined with worker firings • Hiring new, lower-paid employees to replace higher-paid long-term employees • Failing to include system controls for sensitive data during ERP installations • Holding employees accountable for financial results without providing training to understand financial statements • Ignoring the costs to society of pollutants produced • Minimizing environmental costs by moving polluting processes to countries with lax regulations