講義f2中博誠(chéng)通基礎(chǔ)

中博誠(chéng)通國(guó)際技術(shù)培中博誠(chéng)通國(guó)際技術(shù)培BeijingZBCTInternationalFinancial.:+86106212FAX:+861062123959/0859-:+86106212FAX:+861062123959/0859-Room308,ShuangtianBuilding,Block30Jia,BeisanhuanWestRoad,HaidianDistrict,PartDChapter SYLLABUSSYLLABUSPerformancemeasurementFinancialNon-financialPERFORMANCEMEASUREMENTMissionAMissionStatementdescribestheorganisation’sbasicfunctioninsociety.Whatisittryingtoplish?TheelementsofaMissionStatementmightinclude:Purpose:WhydoesitStrategy:Itmayspecifythebusinessthattheorganisationisin,theproductandserviceareasitisgoingtooperateandthenecessarycompetencesthatneedtobepresent.ValuesandCulture:Itmaystatethebeliefs,ethicalstandpointsandprinciplesunderwhichactivityistobecarriedout,itshouldguideallemployeesatalllevelstoworkcollectivelytowardstheachievementofthecorporatemission–‘a(chǎn)guidinglight’.Itmayattempttoincorporateseveralofthestakeholders(forexample,shareholders,customers,employees),andincreasingly,theenvironment.Mission Althoughthemissionstatementmightbeseenasasetof principles,itcan yanimportantroleinthe nningprocess.nsshouldoutlinethefulfillmentoftheorganisation’sEvaluationandObjectivesmayelong-termandshort-term.A thatissufferingfromarecessioninitscoreindustriesandmakinglossesintheshorttermmightcontinuetohavealongtermprimaryobjectiveofachievingagrowthinprofits,butintheshorttermitsprimaryobjectivemightbesurvival.Objectivesorientatetheactivitiesoftheorgansationtowardsthefulfillmentoftheoforganisation’smission,intheoryifnotalwaysinThemissionofabusiness,whetherstatedornot,mustincludeObjectivescanalsobeusedasstandardsformeasuringtheperformanceoftheorganizationanddepartmentsinit.AdvantageofmissionTheMissionStatement yanimportantpartin nningprocessbyaframeworkwithinwhich nsmustbeafocusonascreeningdeviceforunacceptableprojects,practicesandacommunicationdevicetoestablishacommonacceptablecorporatePotentialproblemthewordingofthestatementmayberathervagueand andthereforeprovidelimitedassistanceindevelostrategiesthecontentofthestatementmayprovidethemanagementwithnon-congruentgoals.For isingshareholderwealthmay withanyethicalstatementsmadeinthethepotentialforinconsistentgoalsettingcanoccurbetweendepartments,differingmanageriallevelsandovertimetheMissionStatementisoccasionallyregardedbyemployeesas‘politicalwindowdressing’anddoesnotintheirviewreflectactual strategyandtheactionsofmanagement–thismayresultinadversebehaviouralconsequencesCriticalsuccessCriticalsuccessfactors(CSF’s)areperformancerequirementsthatmustbeachievedifanorganisationistobesuccessfulandoutperformitscompetition.Aslongagoas1955managementreportingsystemandfoundthatitproducedreportsonthefollowingfactors.MarketProductnelEmployeePublicBalancebetweenshort-rangeandlong-rangeCriticalsuccessfactorscanbesetandusedbyidentifyingobjectivesandgoals,determiningwhichfactorsarecriticalfor plishingeachobjectiveandthemdeterminingasmallnumberofperformancemeasuresforeachfactor.Theproblemofshort-Short-termismiswhenthereisabiastowardsshort-termratherthanlong-termperformance.Itisoftenduetothefactthatmanagers’performanceismeasuredonshort-termresults.Organisationsoftenhavetomakeatrade-offbetweenshort-termandlong-termobjectives.Decisionswhichinvolvetheshort-termactionincludefollowing:Postponingorabandoningcapitalexpenditureprojects,thiswouldeventuallyunderminetogrowthandprofits,inordertoprotectshorttermcashflowandprofit.CuttingR&Dexpendituretosaveoperatingcosts,andsoreducingtheprospectsforfutureproductReducingqualitycontrol,tosaveoperatingReducingthelevelofcustomersservice,tosaveoperatingcosts(butsacrificingCuttingtrainingcostsorrecruitment(so mightbefacedwithskillsMeasuresdesignedtoassesstheperformanceofadivisionoritsmanagerEvaluatingmanagers’performanceintermsofcontributiontolong-termaswellasshort-Makingshorttermtargetsrealistic,ifbudgettargetsareunrealisticallytough,amanagerwillbedtomaketrade-offsbetweentheshortandlongterm.Recognisebothfinancialandnon-financialaspectsofOnlyincorporatefactorsforwhichthemanager(division)canbeheldresponsible(accountable)Provideincentivetopromoteperformanceasadivisionwithoverall objectives(e.gshareoptionscheme):goalcongruenceDifferentobjectivesareappropriatetoeachbusiness,sodifferentperformancemeasuresmaybeappropriateforanygivenobjective.FactorstoMeasurementneedsThismeanspeople,equipmentandtimetocollectand yseinformation.Thecostsandbenefitsofprovidingresourcestoproduceaindicatormustbecarefullyweighted measuredagainsttheobjectivesoftheorganisation.Iftheorganizationhasnoclearobjectives,thefirststepinperformancemeasurementistosetthem.Thesecondistoidentifythefactorsthatarecriticaltothesuccessofobjectives.ThesearethecriticalsuccessfactorsdiscussedMeasuresmustbeThismeansfindingoutwhattheorganizationdoesandhowitdoesitsomeasuresreflectwhatactually Managerswillonlyrespondtomeasuresthattheyfinduseful.ThemanagementaccountantthereforeneedstoadoptamodernphilosophytotheprovisionofperformancePerformancemeasurecanbedividedintotwoFinancialperformanceNon-financialperformancePerformancemeasurescan tativeorChangesincoststructures,thecompetitiveenvironmentandthemanufacturingenvironmenthaveleadtoanincreaseduseofNFIs.FinancialperformancemeasuresCategoriesOfRatiosProfitabilityandDebtandLiquidity,controlofcashandotherworkingcapital---ProfitabilityTheseratiosareconcernedwiththeeffectivenessofthefirmingeneratingprofit.Averypopularmeansofassessingafirmistoassesstheamountofwealthgeneratedfortheamountofwealthinvested. Profitbeforeinterestandtax(PBIT) ×100Shareholders'funds+long-termliabilitiesProfitaftertax(PAT) Shareholders'funds ×100CapitalemployedNetprofitbeforetax(operatingprofit)Profitmarginxassetturnover=ROI---Capitalgearingisconcernedwiththerelativesizesofthefundsprovidedbyshareholders,ontheonehand,andbyloancreditorsontheother.Thisisanimportantissueinbusinessfinance,aboutwhichtherearevarioustheoriesandabodyofempiricalevidence.Loanfinancingtendstobecheaperthanequityfinancing.However,loanfinancingexposestheshareholderstogreaterriskthandoesequityfinancing.Ratiosinthisareatendtobeconcernedwiththelevelofcapitalgearing.Total Profitbeforeinterestandtax(PBIT)×---LiquidityLiquidityratiosareaguidetotheriskofcashflowproblemsandinsolvency.Ifa suddenlyfindsthatitisunabletorenewitsshorttermliabilities(forinstanceifthebanksuspendsitsoverdraftfacilities)therewillbeadangerofinsolvencyunlessthe isabletoturnenoughofitscurrentassetsintocashquickly. CurrentAssets CurrentLiabilitiesAsimplemeasureofhowmuchofthetotalcurrentassetsisfinancedbycurrentliabilities.If,forexamplethemeasureis2:1thismeansthatonlyalimitedamountoftheassetsarefundedbythecurrentliabilities. CurrentAssetsminusinventory CurrentliabilitiesAmeasureofhowwellcurrentliabilitiesarecoveredbyliquidassets.Ameasureof1:1meansthatweareabletomeetourexistingliabilitiesiftheyallfalldueatonce.---WorkingRatiosinthisareaattempttoappraisetheefficiencyofmanagementinvariousareas.Thefollowingfirstthreeratiosconsideredlussomethingaboutthemanagement'sefficiencyincontrollingthemainelementsofworkingcapital-inventory,receivablesandpayables.Thustheyhelpintheinterpretationofliquidityratiosdealtwithearlier.yAverageinventory×365CostofsaleItisacalculationofthenumberofdaysinventoryisheldAveragereceivables×365Itisaroughmeasureoftheaveragelengthoftimeittakesfora ’sreceivablestopaywhattheyowe.Iftheperiodisincreasingyearonyear,thisisindicativeofapoorlymanagedcreditcontrolAveragepayables Costofsale/purchase*Note:ifpurchasefigureisnotgiven,CostofsalescanbeusedasanItprovidesaroughmeasureoftheaveragelengthoftimeittakesa topaywhatitowes.Anincreaseisoftenasignoflackoflong-termfinanceorpoormanagementofcurrentassets,resultingintheuseofextendedcreditfrom rs,increasedbankoverdraftandsoon.Non-financialperformanceTraditionally,financialmeasuresareadominantmeasureofperformance.However,asthecompetitiveenvironmentincreasinglydemandsmanagement’sunderstandingofandinvolvementinoperatingdecisions,non-financialperformancemeasurestakeonalargerroleinperformancemeasurement.Thefollowingtableprovidessomeexamplesofperformanceappraisalmeasuresthatmightbeusedinconjunctionwithnon-financialobjectives:MarketMarketshareintermsofpercentagesitsproductNumberofpatents,copyrights,spendingonRandGrowthinturnover,profits,employees,Numberofunitsbyshiftandhours,labourhoursperunit,Numberofclaims,numberofreturnedgoods,warrantyAmountspentinsocialareas(fyingthismightbeaTheuseofnon-financialindicatorsmightbeconsideredtobebetterthan tativemeasuresasthenon-financialindicatorsdirectlymeasureanentity’sperformanceintheactivitiesthatcreateshareholderwealth,suchasmanufacturinganddeliveringqualitygoodsandservicesandprovidingserviceforthecustomer.Also,theymeasureproductivitydirectly;non-financialindicatorsmaybetterpredictthedirectionoffuturecashflows.Forexample,thelong-termfinancialviabilityofsomeindustriesrestslargelyontheirabilitytokeeppromisesofimprovedproductqualityatacompetitiveprice.Theimportanceofnon-financialperformanceTheuseofnon-financialperformancemeasurescanbejustifiedinseveralPerhapsthemostimportantreasonfortheuseofnon-financialperformancemeasuresisthattheygiveearlywarningsignalsofproblems.Forthisreasontheyareoftenreferredtoas‘leadingindicators’.Financialperformancemeasuresareoftendescribedas‘laggingindicators’,thatistheylthefirmthatsomethinghasgonewrongafterithasgonewrong.Theuseofnon-financialperformancemeasuresgivesafirmachanceofcorrectingproblemsbeforetheygotoofar.Forexample,afirmmightbeabletocureaqualityproblemrevealedbyahighlevelofcustomercomintsbeforeithasadamagingeffectonsalesandprofits.Virtuallyallcompaniesfaceincreasinglycompetitivemarketces.Inthefaceofglobalcompetitionnon-financialissuessuchasproductquality,customerservice,delivery,reliabilityandinnovationhave ecrucialelementsofcompetitivestrategy.Noneofthesevariablesaredirectlymeasurableinfinancialterms.Non-financialperformancemeasuresmaybemoreunderstandableandrelevantfornon-financialFinancialmeasuresinisolationcanpotentiallybemanipulatedbymanagers.Usingarangeoffinancialandnon-financialmeasuresmakesitmoredifficultformanagerstohidebadNon-financialmeasurescanbeusedasamethodofimplementinganorganisation’schosenstrategy.Forexample,ifafirmdecidestocompetebyofferingthequickestcallouttimesforproductrepair,thentheeffectivenessofthedeliveryofthisstrategycanbemeasuredbyanon-financialindicatorsuchascustomerwaitingtime.Economy,efficiencyandeffectiveness（Valueformoney）Conceptsofeconomy,efficiencyandeffectiveness（3Es）EconomyisaninputmeasureandisnormallybasedaroundtheexpenditureoftheEconomyliesinoperatingatminimumEffectivenessisanoutputmeasureandlooksatwhattheorganisationachievesintermsofitsobjectives.Effectivenessisachievingestablishedobjectives.Efficiencyisacombinationoftheabovetwomeasures.ItconsidersoutputinrelationtoEfficiencyconsistsofattainingdesiredresultsatminimumGeneralideasofperformancemeasurementGeneralIdeasOverallgoaloftheorganisationistogeneratelong-termeconomicFinancialmeasuresmustbesupplementedwithdrivesoflong-termfinancialShort-termismisamajorproblemofperformancemeasurement,whichariseswhenmanagersarejudgedbycriteria(e.g.ROI,RI),whichdonotmeasurethelong-termeffectsofthedecision.ExternalShareholders/employees/loanproviders/ernment/community/customers/Differentstakeholderswillhavedifferentobjectivesandcompaniesmaydealwiththisbyhavingarangeofperformancemeasures.Performancerequiredbydifferentstakeholdersmay ,andthereforethe adoptanapproachofsatisfactoryperformanceineacharearatherthanoptimizingprofitattheexpenseofotherobjectives.EconomicEconomicLocaleconomicInterestExchangeernmentfiscalPerformancemanagementmustconsiderinformationoncompetitors’pricesandcoststructuresandidentifywhichfeaturesofanorganisation’sproductsaddmostvalue.Managementaccountinginformationhastobeproducedspeedilyandbeup-to-datesothatmanagerscanreactquicklyandeffectivelytochangingmarketconditions.Chapter13ApplicationsofperformanceSYLLABUSSYLLABUSPerformancemeasurementformanufacturingPerformancemeasurementformanufacturingPerformancemeasurementforPerformancemeasurementfornon-profit-makingorganizationsManagementPerformancemeasurementThebalancedPerformancemeasurementformanufacturingInacustomer-focusedorganization,basicmeasuresforsalescanbesupplementedbyahostofothersincludingcustomerrejects/returns:totalsales.Performancemeasuresformaterialsandlabourincludevariance.Performancecanbemeasuredusingthestandardhour.Efficiency,activityandcapacityratioprovideusefulPerformancemeasurementformanufacturingInajobbingenvironmenteachjobundertakenisunique.Thereareanumberofimplicationsforperformancemeasurement:detailednningshouldbeundertakenandperformancetargets rsmaybedifferentforeachjob,makingithardertosetstandardsforquality,speedofdeliveryandsoon.customersatisfactionmeasuresareparticularimportantinthisenvironment(paymentmightdependcontractuallyuponcustomersatisfaction).becauseeachjobwillbedifferenttheorganizationwillhavetobeextremelyflexible.Measuresofsuccessinadaptingtonewrequirementsandemployeeskillswillprovideakeyitislikelythatthejobwillneedtobecompletedwithinacertaintimeandthereforeanongoingcheckmustbekeptofperformanceinrelationtothedeadline.performancemeasurementinmanufacturingisincreasinglyusingnon-financialmeasures.Fourover-archingmeasuresformanufacturingenvironment.Cost:costQuality:factorsinhibitingTime:bottlenecks,Innovation:newproductPerformancemeasuresforThemajorcharacteristicsofserviceswhichdistinguishservicesfrommanufacturingareasThereisnophysicalsubstanceofTheproductionandconsumptionofservicearesimultaneous,andthereforeitcannotbeinspectedforqualityinadvance.ManyserviceorganizationsfacetheproblemofachievingconsistencyinthequalityofitsManyservicesareperishable.Theservicesofadentistarepurchasedonlyforthedurationofanperformancemeasurescoveringthefollowingsixhavebeensuggestedforservicecompetitiveperformance---focusesonfactorssuchassalesgrowth,marketshareandabilitytoobtainnewbusinessfinancialperformance---likeanyotherbusiness,aservicebusinessneedsto n,andits nscanbedrawnupintheformofabudgetqualityofservice---Servicequalityismeasuredprincipallybyqualitativemeasures,although tativemeasuresareusedbysomebusiness.Thefollowingtableshowsthemeasuresusedtoassess4qualityfactorsandthemeansofobtainingtheinformationbyBritishAirportsAuthority(BAA)atransportfacilityserviceServicequalityWalkingEaseoffindingwayCustomersurveyandoperationalCleanlinessofenvironment managementCrowdednessof managementStaffattitudeand managementflexibility---speedof---abilitytorespondtocustomers’---cowithresourceutilization---isusuallymeasuredintermsofForForAmuseummayhavethefollowingobjectives:Educatingthepublic.PreservationandOneherecouldariseifthedecisiontochargeanentryfeeconsidered.ThiswouldraisefundsforresearchbutdiscouragepotentialPerformanceInNot-For-ProfitNPMOsincludeprivatesectororganizationssuchascharitiesandchurchesandmuchofthepublicsector.AmajorproblemwithmanyNPMOs,particular ernmentbodies,isthatitisdifficulttodefinetheirPerformanceofNPMOisoftenjudgedintermsofinputsandoutputs.Thistiesinwiththe“valueformoney”criteriaoftenusedtoassessNPMOs.Theproblemof fiablelackofprofitmeasure---Companieshaveprofitastheirbottomlinemeasure.Not-for-profitorganizationsarenotmotivatedbyadesireto iseprofit.multipleMultiplestakeholdersinnot-for-profitorganisationgiverisetomultipleobjectivessothereisaneedtoprioritises/compromise.ObjectivesbedifficulttochangeasaresultofthepoliticalbeachievableindifferentMeasuringNatureofserviceFinancialPolitical,socialandlegalPerformancemeasurementinNFPCostandbenefitysis(intermsofinputsandUndertakecostandbenefit ysisofprojectsinanefforttoceamonetaryvalueontheserviceAcceptthatperformancemeasurementmusttosomeextentbesubjective.JudgmentscanbemadebyexpertsinthatparticularNFPactivity.Facilitateregionalben arkingbyintroducingadjustmentfactorstocompensateforknowregionaldisparitiese.g.permithigherratesofpayinhighwagelocations;thereislessofaproblemityandso arkingisInpractice, arking Regularlycomparingaspectsofperformance(functionsorprocesses)withbestIdentifyinggapsinFollowingthroughwithimplementingFollowingupbymonitoringprogressandreviewingtheManagementperformancePossibleManagementPerformanceMeasuresIncludeThe---subjective---Judgmentof---upward---accountingThePurposeOfPerformanceMeasurementIsToControlAndMotivateTheOrganisationToImproveCaremustbetakenwhendesigningaperformancemeasurementsystemtoavoiddysfunctionalbehaviouranddemotivation.Measuresdesignedtoassesstheperformanceofadivisionoritsmanagerprovideincentivestopromoteperformanceasadivisionwithoverall objectives-goalonlyincorporatefactorsforwhichthemanager(division)canbeheldresponsible(accountable)-recognisebothfinancialandnon-financialaspectsofrecogniselonger-term,asweltasshort-term,trytofocusonandimprovethemeasurementofcustomerbeindependentofpastactivitybydeveloperformance Managersmayberewardedaccordingtotheoverallperformanceofthe ratherthantheirownresponsibilitycentre.Thismayhelpgoalcongruencebutmaynotbemotivatingifpoorly-performingmanagersarerewardedinthesamewayasmanagerswhoareperformingwell.TraditionalPerformanceCostProfitInvestmentROI=(PBIT/CapitalEmployed)×ROI=(PBIT/CapitalEmployed)×AccountingPBITafterCapitalRI=PBIT-ImputedInterestxCapitalAccountingPBITafterCapitalNotionalinterestoncapital=theCEinthedivisionnotionalcostofcapitalorinterestrateWidelyusedandAsarelativemeasureitenablescomparisonstobemadewithdivisionsorcompaniesofdifferentPossibletousedifferentratesofinterestfordifferenttypesofCostoffinanceisbeingsofIndI:ItcanbedifficulttoidentifycontrollableBothROIandRIinvolveacostofcapitalfigurewhichmustbeestimated.ThecostofcapitalisdifficulttocalculateandisnotknownwithcertaintyBothROIandRImeasuredivisionalperformancebasedonasinglevalue.MostorganizationsthesedaysareofsuchacomplexnaturethatasinglefigureisunlikelytobeadequateforaninvestmentBalancedTheBalancedScorecardisanagreedsetofmeasuresthatprovidesmanagerswithacomprehensive,balancedandtimelyviewofanorganisation'sperformance.TheBalancedScorecardisatechniquewhichaimstoallowmanagerstolookatthebusinessfrom4differentsbyseekingtoprovideanswerstothefollowing4basicquestions.Howdoourcustomersseeus?(CustomerWhatmustweexcelat?(InternalCanwecontinuetoimproveandcreatevalue?(InnovationandlearningHowdowelooktoshareholders?(FinancialWithineachofthesecategoriesa shouldseektoidentifyaseriescriticalsuccessfactors(CSFs)andkeyperformanceindicators(KPls).CSFs-thosethingswe ymustgetrighttosucceedinrelationtoa KPIS-waysinwhichwecanmeasuretheCostreductionGrossmargin/Netmargin% efromnewNewproductsPercentageofsalesfromnewproductsBenarkpricesvcompetitorsDefectrateDeliveryleadOperationalprocessAfter-salesCycletime,unitcostEngineeringefficiencyRectificationInnovation&InternallearningTechnologyStaffturnoverSuggestionsimplementedTimetodevelopnextgenerationof% efromnewNBtheultimatemeasureofcorporateperformance(forquotedcompanies)istheshareAdvantagesofabalancedscorecardThebalancedscorecardapproachseekstomeasureperformanceunderavarietyofheadingsoffinancialsuccess,customersatisfaction,processefficiencyandorganisationallearningandgrowth.Itmeasuresperformanceinavarietyofways,ratherthanrelyingononeManagersareunlikelytobeabletodistorttheperformancemeasure,badperformanceisdifficulttohideifmultipleperformancemeasuresareused.Ittakesalong-termofbusinessSuccessinthefourkeyareasshouldleadtothelong-termsuccessoftheItisflexible,whatismeasuredcanbechangedovertimetoreflectchanging‘Whatgetsmeasuredgetsdone’,thatisifmanagersknowtheyarebeingappraisedonvariousaspectsofperformancetheywillpayattentiontotheseareas,ratherthansimplypayinglipserviceto2.5.4Limitationsofabalancedscorecard ingmeasures–somemeasuresinthescorecardsuchasresearchfundingandcostreductionmaynaturally .Itisoftendifficulttodeterminethebalancewhichwillachievethebestresults.Selectingmeasures–notonlydoappropriatemeasureshavetobedevisedbutthenumberofmeasuresusedmustbeagreed.Expertise–non-financialmanagershavedifficultywiththeusualprofitInterpretation–evenafinancial-trainedmanagermayhavedifficultyinputtingthefiguresintooverall arkingisanattempttoidentifybestpracticesandbycomparisonofoperationstoachieveimprovedperformance.Fourtypesof arkingarecommonlyInternalben arking.Thisinvolvesthecomparisonofdifferentdepartmentsordivisionswithinanorganisation.Dataforthisiseasytoobtainandconditionsareoftencomparable.Learningmaybelimitedascomparisonsareonlybeingmadewithinthesame Competitiveben arking.Thisinvolvescomparingperformancewiththatofdirectcompetitors.Thepotentialforlearningisimprovedbutdatamaybedifficulttoobtain.Forcommercialreasonsfirmsareoftenunwillingtodivulgeinformationtodirectcompetitors.ThegrowthofbenarkingclubsandtradeassociationshasreducedtheproblemsofcompetitiveFunctionalbenarking.Variousfunctionsinthebusinessarecomparedwiththoserecognisedasthebestexternalpractitionersofthefunction.A couldcompare preparationtimewiththatofacredit,itsdeliverytimewithafirmofcouriersetc.Thepotentialforlearninghowtoimproveperformanceisveryhigh,butcomparabilityproblemssometimesexist.(Thisissometimesreferredtoasoperationalorgenericbenarking)Strategicbenarking.Thisinvolvescomparisonofperformancewithcompetitorsatthestrategiclevel.Areassuchasmarketshareandreturnoncapitalemployedcouldbeconsidered.Suchcomparisonsareimportantindesigningcompetitivestrategy.Benefitsof ItsflexibilitymeansthatitcanbeusedinbothpublicandprivatesectorandbypeopleatdifferentlevelsofresponsibilityCrosscomparisonsaremorelikelytoexposeradicallydifferentways ngItisaneffectivemethodofimplementingchange,peoplebeinginvolvedinidentifyingandseekingoutdifferentwaysof ngthingsintheirownareas.ItidentifiestheprocesstoIthelpswithcostItimprovestheeffectivenessofItprovidesafocus Itestablishesadesiretoachievecontinuousimprovementandhelpsdevelopacultureinwhichitiseasiertoadmitmistakeandmakechanges73Limitationof Difficultiesindecidingwhichactivitiesto DifficultinpersuadingotherorganisationstoshareSuccessfulpracticesinoneorganisationmaynottransfersuccessfullytoThedangerofdrawingincorrectconclusionsfrominappropriateEmployeeChapter14CostSYLLABUSSYLLABUSCost COSTREDUCTIONSANDVALUECostcontrolandcostCostcontrol–itisaboutregulatingthecostsofoperatingabusinessandkeecostswithinacceptablelimits. Thisoughttoleadtoareductioninexcessivespending.Costreduction–itisannedandpositiveapproachtoreducingexpenditureandstartswithanassumptionthatcurrentcostlevelsornnedcostlevelsaretoohigheventhoughcostcontrolmightbegoodandefficiencylevelshigh.Itaimstoreduceexpectedactualcostlevelstobelowcurrentbudgetedorstandardlevelsbypurchasingnewequipment,changingmethodsofworkingandsoon..CostreductionExaminationofproductrangemayshowshowthatitistooextensiveandthatsomeoftheproductsareuneconomicbecausetheyareproducedinsmall ties.Ingeneralfewervarietiesmakesforeasierproduction,increasethescopeforautomation,andlikelytoreducecost.ImprovingOnewayofreducingcostsistoimprovetheefficiencyofmaterialsusage,theproductivityoflabourortheefficiencyofmachineryorotherequipment.yfsechangingthespecificationsforcuttingsolidintroducingnewequipmentthatreduceswastageinprocessingorhandlingidentifyingpoorqualityoutputatanearlierstageintheoperationalusingbetterquality-givingincentivesforbetterchangingworkmethodstoeliminateunnecessaryproceduresandmakebetteruseoflabourimprovingthemethodsforachievingco-operationbetweengroupsorsettingmorechallengingstandardsofintroducingstandardswheretheydidnotexist yfqt.makingbetteruseofequipment achievingabetterbalancebetweenpreventivemaintenanceandmachine‘downtime’forMaterialThewayreducingmaterialscostsareasBulkUsestandardmaterialratherthanspecialBidforr(usuallyforlargeLabourLabourefficiencycouldbeimprovedbychangingworkingmethod(possiblybyusinganorganisationandmethods(O&M)studyoraworkstudy).WorkStudy-isatechniqueusedinfactoriestodeterminethemostefficientmethodsofWorkStudy-isatechniqueusedinfactoriestodeterminethemostefficientmethodsofand Methodstudyistherecordingysisofexistingmethods ngworkcomparingthiswithproposedmethodsinordertoimplementnewandmoreeffectiveprocedures. WorkmeasurementistheprocessofestablishingtimesforaqualifiedworkertocarryoutataskatadefinedlevelofperformanceOrganizationandmethods(O&M)-isthe ysisofadministrativeofficeproceduresinordertoproducemoreefficientO&Miscarriedoutbyaprocessofysis,designandimplementationimprovedmethods,equipmentandproceduresandtherearemanyareaswhereitcanbeappliedintheoffice.Forexample:officelayout,workflow,paperworkelimination,mechanizationUsingABCtoidentifynon-valueaddedUsingJITtoreduceinventoryholdingUsingstandardcostingtocontrolUsingtargetcostingandlifecycleReducingfinancecost.These?takingadvantageofc