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

Fall 2007

Crosson

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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

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Management Accounting v. Financial AccountingTable 1

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!

Good follow up exercise is SE 1.

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Management ProcessFigure 1

PlanPerformEvaluateCommunicate

The Ongoing Management Process—

WHAT MANAGERS DOWHAT MANAGERS DO

Good follow up exercise is SE3 or E2.

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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.

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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.

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Introducing Strategy

SupplyChain/Network

Value Chain

StrategicPositioning

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Strategic Positioning

Michael Porter…

• Cost Leadership

• Differentiation

• (Focus)

Good follow up exercise is SE2.

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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)

Supply Chain and Value Chain AnalysisA Detailed Look at Strategy…

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Balanced Scorecard feeds back to Strategy

ValueChain

Balanced Scorecard

StrategicPositioning

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Performance Measures

Financial and Nonfinancial MeasuresBalanced Scorecard

Financial Learning and Growth Internal Business Processes Customers

Lead and Lag Indicators

Good follow up exercise is E9Or look and listen to SE8.

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The Balanced Scorecard:The Strategy Map-a causal value chain

Internal External

2. Operations/Internal Business Processes

1. Learning and Growth/ Employees/People

3. Customer Relationships

4. Environmental/ Community Impact

5. Financial Results– Short-term– Long-term

Cause-and-Effect Chain Illustration for a Bank

Learning and GrowthPerspective

Internal-BusinessPerspective

CustomerPerspective

FinancialPerspective

Number of Training Hours Employees Receive

Employee Scores on in-house tests about sales, service, and product knowledge

Number of Successful Referrals and/or Cross-sales

Customer Satisfaction Ratings on Quarterly Surveys

Customer Retention Rate: percent of last year’s customers still with bank

Improved Loan, Deposits, and Non-Interest Income

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.

Causal Chain Explanation:

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Management Tools & Continuous Improvement Figure 5

Just-In-Time JIT • Types of Time Total Quality Management TQM• Costs of QualityActivity-Based Management ABM

ABC• Value-adding v. Nonvalue-addingTheory of Constraints TOC• Bottlenecks

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Just-In-Time JIT

PhilosophyTypes of Time

Process InspectMove QueueStore

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Total Quality Management TQM

Evolving Concept Product Service Experience

Costs of Quality Conformance

Prevention Appraisal

Nonconformance Internal Failure External Failure

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Activity-Based Management ABM

ABC v. Traditional Product/Department Costing

Value-adding

Nonvalue-adding

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What Do You Know?

Exercise 8Exercise 8

1.1.

2.2.

3.3.

4.4.

5.5.

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What Do You Know?

Exercise 8Exercise 8

1. V1. V

2. NV2. NV

3. V3. V

4. V4. V

5. NV5. NV

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Theory of Constraints TOC

The GoalThe Goal by Goldratt and Cox

What is the goal of any business?

Constraints of Time and Cost

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What Do You Know?

Exercise 7Exercise 7

CFO 1:CFO 1:

CFO 2:CFO 2:

CFO 3:CFO 3:

CFO 4:CFO 4:

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What Do You Know?

Exercise 7Exercise 7

CFO 1: JITCFO 1: JIT

CFO 2: TQMCFO 2: TQM

CFO 3: ABMCFO 3: ABM

CFO 4: TOCCFO 4: TOC

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Code of EthicsExhibit 4

Ethics Quiz

Competence Confidentiality Integrity Credibility Resolution of Ethical

Conflict

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What Do You Know? Exercise 14 and 15

Rank in order of importance: Competence, Confidentiality, Integrity, Credibility

Explain your rankingHow do actual company ethics

statements (Exercise 15) compare with your ranking?

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Homework

P 2P 2