Emerging Management Practices

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Cost Accounting Traditions and Innovations Barfiel
d, Raiborn, Kinney
Chapter 17 Emerging Management Practices
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Learning Objectives (1 of 2)

• Explain how business process reengineering
  affects the way that firms operate
• Describe the competitive forces that encourage
  downsizing and restructuring
• Explain why operations are becoming more diverse
• Describe how diverse operations affect the
  accounting system

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Learning Objectives (2 of 2)

• List the benefits of adopting enterprise resource
  planning systems
• Explain why firms are forming strategic alliances
• Describe how open-book management changes
  accounting methods and practices
• List three generic approaches used to control
  environmental costs

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The Changing Workplace

• Business Process Reengineering
• Downsizing and Restructuring
• Workforce Diversity

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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
• Preparing finished goods for shipment to
  customers
• Recording journal entries

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Business Process Reengineering

• Associated with
• radical change
• employee layoffs
• outsourcing
• technology acquisitions

• Enabled by
• advanced technology
• pursuit of increased quality
• increase in price competition due to
  globalization

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Business Process Reengineering

• Define objectives of the project
• Identify processes to reengineer
• Determine how to measure success
• Identify technology levers (innovation, increased
  quality, increased output, decreased costs)
• Develop prototype of the reengineered process and
  then refine it

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Business Process Reengineering
Aggressive Objectives
Top Management Support
Pilot Project
Involve Customers and Suppliers
Specific Person Responsible
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Downsizing and Restructuring

• Automate to replace manual technologies
• Employees produce more output
• Fewer employees are needed

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Risks of Downsizing

• Deplete in-house talent pool
• Loss of workforce knowledge
• Loss of organizational memory
• Loss of feeder pools for future top management
• Diminished worker morale, loss of trust, and
  lessened communication
• Negative impact on corporate culture
• where lifetime employment was the norm
• where environment was perceived as nurturing

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Business Process Reengineering Monetary Costs

• Restructuring - one-time loss caused by sale of
  unprofitable assets
• Downsizing - severance costs for employee layoffs

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Workforce Diversity

• Worldwide marketing and manufacturing
• Diverse
• religions
• races
• values
• work habits
• cultures
• political ideologies
• education levels

Accounting Provides an International Technical La
nguage
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Global Business Challenges

• Currency values
• Labor practices
• Political risks
• Tax rates
• Commercial laws
• Infrastructure (ports, airports, highways)

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Why Diversify?

• Legal requirements
• Business initiatives to employ minorities
• Organization self-interest
• diverse workforce connects to diverse markets
• increased diversity leads to lower employee
  turnover
• heterogeneous groups are more creative
• diverse employee pool yields more management
  talent
• need large employee pools for future workers

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Enterprise Resource Planning

• Automate and integrate business processes
• Share common data and practices across the entire
  enterprise
• Produce and access information real-time
• Links the customer end of the supply chain
  through production and delivery to the supplier

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Traditional System
A/P
G/L
A/R
HR
Fixed Assets
Pur- chasing
Manu- facturing
Mar- keting
Silos of data that are not integrated
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Enterprise Resource Planning
ERP
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Enterprise Resource Planning

• Impact on the finance function
• Help to select and install software
• Analyze the data repository to support management
  decisions
• Maintain the integrity of the data

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Strategic Alliances

• An agreement, involving two or more firms with
  complementary core competencies, to jointly
  contribute to the supply chain

• Joint ventures
• Equity investments
• Joint RD arrangements
• Technology swaps
• Licensing
• Exclusive and buyer/seller agreements

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Strategic Alliances

• Typical strategic alliances
• exploit technology
• have partners with access to different markets
• share risks and rewards

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Forming a Strategic Alliance

• Determine contributions from parent organizations
  (cash, human capital, technology, patents, supply
  contracts)
• Establish a governing board
• Agree to profit and loss sharing
• Align interests of the parent organizations with
  the new entity

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Open-Book Management

• Cause workers to understand how their actions
  affect costs and revenue
• Employees can adopt or change work practices to
  increase revenues or decrease costs
• Employees understand how their actions affect
  achievement of the overall corporate objectives

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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 companys bottom line

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Common Principles ofOpen-Book Management

• Turn management of the business into a game
  employees can win
• Open the books and share information
• Teach employees to understand financial
  information
• Show employees how their work
  influences financial results
• Link nonfinancial measures to financial
  results

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Common Principles of Open-Book Management

• Target priority areas and empower employees to
  make improvements
• Review results together keep employees
  accountable
• Post results and celebrate successes
• Distribute bonus awards
• Share ownership of the company (ESOP)

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Open-Book ManagementImplementation Challenges

• Overcome history of guarding financial
  information
• Convey information in understandable way
• Teach workers to interpret and use information
• Develop performance measures that
  employees understand
• Integrate program across segments and
  functional areas

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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 - recyclable or not
• actions of suppliers who produce inputs
• customer habits in consuming and disposing of
  products and packaging

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Environmental Management Systems

• End-of-pipe strategy
• produce waste and then find a way to clean it
• Process improvements
• recycle wastes internally, reduce or eliminate
  wastes
• Pollution prevention
• avoid pollution by not producing any pollutants

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Environmental Issues

• Relationship between quality costs and
  environmental costs
• Does an increase in quality reduce environmental
  costs???

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Questions

• How does business process reengineering affect
  the way that firms execute processes?
• What are the benefits of adopting enterprise
  resource planning systems?
• Why are firms forming strategic alliances?