Chapter 1 The Changing Business Environment : A Manager’s Perspective

1. Chapter 1The Changing Business Environment: A Manager’s Perspective Fall 2007 Crosson Use only with permission of Susan Crosson

2. Learning Objectives • Management v. Financial Accounting • Management Cycle • Value Chain and Supply Chain Analyses • Performance Measures and the Balanced Scorecard • Management Tools: JIT, TQM, ABM, TOC • Code of Ethics Use only with permission of Susan Crosson

3. Users Nature of Info Report Purposes Report Frequency Report Format Measures—you get what you measure! Users Nature of Info Report Purposes Report Frequency Report Format Measures—you get what you measure! Management Accounting v. Financial AccountingTable 1 Good follow up exercise is SE 1. Use only with permission of Susan Crosson

4. Management ProcessFigure 1 Plan Perform Evaluate Communicate Good follow up exercise is SE3 or E2. The Ongoing Management Process— WHAT MANAGERS DO Use only with permission of Susan Crosson

5. Planning FrameworkFigure 2 • Goal/Vision-value adding • Mission-why exists • Strategic Objectives-long-term performance • Tactical Objectives-mid-term performance • Operating Objectives-short-term performance • Business Plan-how will achieve performance objectives and how will measure success • Budgets-$$$ expression of business plan Good follow up exercise is E4. Use only with permission of Susan Crosson

6. More on Terms • Mission-specifies organization’s identity. Its reason for existence and longer term overall purpose. It embodies the unique character of the organization. • Vision Statement-specifies what the organization aims to become in the longer term. It specifies an end point and portrays the organization’s long term ideal state… “To be #1” • Statement of Core Values-specifies the key beliefs and philosophies of the organization that drives what it does and how it does it. Use only with permission of Susan Crosson

7. Introducing Strategy Supply Chain/Network Value Chain Use only with permission of Susan Crosson

8. Strategic Positioning • Michael Porter… • Cost Leadership • Differentiation • (Focus) • Good follow up exercise is SE2. Use only with permission of Susan Crosson

9. Supply Chain and Value Chain AnalysisA Detailed Look at Strategy… • Upstream (supply chain) • Your Operation (value chain comprised of primary processes and support services) Good follow up is SE5, SE6, or E6. • Downstream (supply chain) Use only with permission of Susan Crosson

10. Balanced Scorecard feeds back to Strategy Value Chain Balanced Scorecard Use only with permission of Susan Crosson

11. Performance Measures • Financial and Nonfinancial Measures • Balanced Scorecard • Financial • Learning and Growth • Internal Business Processes • Customers • Lead and Lag Indicators Good follow up exercise is E9 Or look and listen to SE8. Use only with permission of Susan Crosson

12. The Balanced Scorecard:TheStrategy Map-a causal value chain Internal External 4. Environmental/ Community Impact • Learning and Growth/ • Employees/People 3. Customer Relationships 2. Operations/Internal Business Processes 5. Financial Results – Short-term – Long-term Use only with permission of Susan Crosson

13. Cause-and-Effect Chain Illustration for a Bank Learning and GrowthPerspective Internal-Business Perspective CustomerPerspective FinancialPerspective Customer Retention Rate: percent of last year’s customers still with bank Number of Training Hours Employees Receive Improved Loan, Deposits, and Non-Interest Income Customer Satisfaction Ratings on Quarterly Surveys Employee Scores on in-house tests about sales, service, and product knowledge Number of Successful Referrals and/or Cross-sales Causal Chain Explanation: If employees receive training in sales effectiveness, customer service, product profitability, and local bank knowledge, then better customer service and higher quality interactions with existing clients can take place. Bank employees will be better able to ascertain the needs of customers, thereby making higher quality referrals and cross-sell proposals to customers, and customers will be more satisfied and choose to continue banking with bank. Increased referrals or cross-sales increases non-interest income and provides the basis for growth in deposit and loan balances.

14. Management Tools & Continuous ImprovementFigure 5 • Just-In-Time JIT • Types of Time • Total Quality Management TQM • Costs of Quality • Activity-Based Management ABM • ABC • Value-adding v. Nonvalue-adding • Theory of Constraints TOC • Bottlenecks Use only with permission of Susan Crosson

15. Just-In-Time JIT • Philosophy • Types of Time • Process • Inspect • Move • Queue • Store Use only with permission of Susan Crosson

16. Total Quality Management TQM • Evolving Concept • Product • Service • Experience • Costs of Quality • Conformance • Prevention • Appraisal • Nonconformance • Internal Failure • External Failure Use only with permission of Susan Crosson

17. Activity-Based Management ABM • ABC v. Traditional Product/Department Costing • Value-adding • Nonvalue-adding Use only with permission of Susan Crosson

18. What Do You Know? Exercise 8 1. 2. 3. 4. 5. Use only with permission of Susan Crosson

19. What Do You Know? Exercise 8 1. V 2. NV 3. V 4. V 5. NV Use only with permission of Susan Crosson

20. Theory of Constraints TOC The Goal by Goldratt and Cox • What is the goal of any business? • Constraints of Time and Cost Use only with permission of Susan Crosson

21. What Do You Know? Exercise 7 CFO 1: CFO 2: CFO 3: CFO 4: Use only with permission of Susan Crosson

22. What Do You Know? Exercise 7 CFO 1: JIT CFO 2: TQM CFO 3: ABM CFO 4: TOC Use only with permission of Susan Crosson

23. Code of EthicsExhibit 4 • Ethics Quiz • Competence • Confidentiality • Integrity • Credibility • Resolution of Ethical Conflict Use only with permission of Susan Crosson

24. What Do You Know?Exercise 14 and 15 • Rank in order of importance: Competence, Confidentiality, Integrity, Credibility • Explain your ranking • How do actual company ethics statements (Exercise 15) compare with your ranking? Use only with permission of Susan Crosson

25. Homework P 2 Use only with permission of Susan Crosson