Management Accounting Seminar MAF651

Seminar Management Accounting (MAF651)

• The document is final notes for a seminar management accounting course at Universiti Teknologi MARA (UiTM).
• A QR code is included to open the document on Studocu.
• The document is not sponsored or endorsed by any college or university.
• Downloaded by EZZA NURFADZREEN RUSLI ([email protected]).

Performance Measurement System (PMS)

• PMS is a system to achieve individual and organizational goals.
• It monitors employee, department, and overall organizational performance.
• PMS is a continuous process of planning, monitoring, and reviewing employee work goals.
• Advantages of widespread use include encouraging focus on profits and assets.
• Disadvantages include encouraging short-term, financial performance, potentially reducing long-term gains.
• Effective PMS measures are benchmarked to high external standards, involving employee participation, and linking to reward systems.
• PMS features include linking performance measures to organizational strategies and goals; goals that are understandable, communicated to employees, relate to activities under employee control, and are reported close to the period in question.
• Financial performance measures include return on investment (ROI). ROI is calculated as Net profit /Investment.

Types of Performance Measures

• Residual Income (RI): Profit remaining after subtracting an imputed interest cost, encouraging profitable investments.
• Economic Value Added (EVA): Profit after deducting the cost of capital adjusted for taxes, focusing on residual wealth and cash flow.

Non-Financial Performance Measures

• Examples include; conversion rates, customer satisfaction, retention, customer complaints, wait time, product defects, product efficiency, on-time delivery, average salaries, competitiveness, etc.
• Non-financial performance measures provide a better picture of a company's future, reduce earning management, provide indicators of intangible assets, and connect closer to organizational strategies.

Balance Scorecard

• A balanced scorecard is used to assist managers in evaluating past performance and driving future performance.
• It provides a framework for identifying what goals should be achieved and measured.
• Enables managers to execute strategies.
• Incorporates non-financial operational measures.
• Measures are reported during the period to enable timely corrections to problems.
• Combination of lead and lagging indicators (lag indicators; current state, lead indicators; future state).

Benchmarking

• Benchmarking involves comparing processes, functions, and activities within an organization against external businesses.
• Types include strategic, performance/competitive, and process benchmarking.
• Strategic benchmarking involves comparing overall strategy with successful organizations.
• Performance/competitive benchmarking compares an organization's performance (e.g. metrics, market share, customer satisfaction) with competitors.
• Process benchmarking compares specific processes within an organization with those of other leading organizations (e.g., order fulfillment processes).
• Benefits include identifying areas for improvement and better strategic decision making, optimized cost savings, alignment with industry and competitor standards, set clear performance parameters, and promote transparency.

Incentive Scheme and Reward System

• Rewards are benefits given to employees such as money, promotions, benefits, or satisfaction (pride of work, sense of accomplishment, or teamwork).
• Types of Rewards: extrinsic, tangible (e.g., pay raises, bonuses); and intrinsic, intangible (e.g., praise, recognition).
• Performance-related Reward System: reward schemes based on individual (individual incentive plans) or team performance (team-based incentive scheme — tied to the overall outcome of the team).

Motivation Theories

• Vroom's Expectancy Theory: Human actions based on expectations of outcomes from those behaviors. (Effort to performance expectancy, performance to outcome, and outcome to personal goals).
• Herzberg's Two-Factor Theory: Hygiene (extrinsic) factors create dissatisfaction if absent, but do not intrinsically motivate (job security, salary). Motivators (intrinsic) factors relate to job outcomes that encourage motivation and job satisfaction (achievement, recognition, work, responsibility).
• McClelland's Needs Theory: Human behavior influenced by the desire to excel, accomplish standards, strive for success and influence other's behaviors, have interpersonal relationships.
• Locke's Goal Setting Theory: Achieving specific and challenging goals with suitable feedback leads to higher performance, increasing willingness to work towards goal attainment, clarity, challenge, commitment, feedback, and task complexity.

Change Management & Risk Management

• Organizational change: Reviewing, modifying structures and business processes (internal/external events).
• Change Management Process: Identifying scope, current state, future goals, results, risks, planning, presentation, evaluation, and communication.
• Aspects of change management include planned change (Lewin's model—unfreeze, change, refreeze), incremental and big bang changes, risk management (transfer, avoid/abandon, pool, diversify), risk attitude and capacity, and risks assessment.

This quiz covers key concepts from the Management Accounting seminar course MAF651 at Universiti Teknologi MARA. It includes performance measurement systems, their advantages and disadvantages, as well as their role in achieving organizational goals. Test your understanding of management accounting principles and PMS features.