1. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 19: Emerging Management Practices Cost Accounting Principles, 9e Raiborn ● Kinney

2. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objectives How do business process reengineering initiatives cause radical changes in the way firms execute processes? How are competitive forces driving decisions to downsize and restructure operations? In what ways, and why, are operations of many firms becoming more diverse? How does the increasing diversity affect the roles of the firms’ accounting systems? Why are firms adopting enterprise resource planning systems, and how are such systems used? What are strategic alliances, what forms do they take, and why do firms participate in them? What are the characteristics of open-book management, and why does its adoption require changes in accounting methods and practices? What are the three generic approaches that firms can take in controlling environmental costs?

3. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. Managing Change Invest time to explain the change Measure progress in achieving change Communicate feedback about the success of the change process Use business process reengineering to manage change

4. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 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  Packaging finished goods for shipment to customers  Recording journal entries  Developing an organizational strategic plan

5. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 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

6. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. Business Process Reengineering Define the project Review the business baseline Identify opportunities Verify the opportunities Plan the achievement of the benefits Review and Report

7. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. Downsizing Reduces costs and improves profits in conjunction with substantial investments in advanced technology Changes mix of inputs used to produce outputs Increases emphasis on technology-based conversion processes Reduces the emphasis on manual conversion processes (reduces the labor requirement)

8. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. Why Diversify? Legal requirements Business initiatives to increase opportunities for minorities Organizational self-interest  Potential leadership resources to reach diverse groups of customers  Improve business strategy  Provide more innovation potential  Increase experience levels for projects

9. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. Enterprise Resource Planning (ERP) Automate and integrate business processes Share common data and practices across the entire enterprise Produce and access information real-time Link the customer end of the supply chain through production and delivery to the supplier

10. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. Enterprise Resource Planning Financial professionals  Help to select and install ERP software  Analyze the data repository to support management decisions  Maintain the integrity of the data

11. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. Strategic Alliances  An agreement, involving two or more firms with complementary core competencies, to jointly contribute to the supply chain  Joint ventures  Equity investments  Licensing arrangements  Joint R&D arrangements  Technology swaps  Exclusive buyer–seller agreements

12. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. Strategic Alliances  Output produced reflects a joint effort between (or among) independent firms and the rewards of that effort are split between (or among) the allied firms  Blurs boundaries between supplier and customer  Typical strategic alliances  Exploit partner knowledge  Have partners with access to different markets  Allow sharing of risks and rewards

13. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. Strategic Alliances and the Finance Function When forming a strategic alliance, finance professionals  Assess risk  Develop strategies for parent company management  Design the financial structure  Develop management control systems  Install accounting and other information systems

14. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. Open-Book Management Increasing a firm’s performance by involving all workers and by ensuring that all workers have access to the operational and financial information necessary to achieve performance improvements

15. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 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 company’s bottom line Open-Book Management

16. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. Open-Book Management Open-Book Management typically works best in the following types of firms:  Small size  Decentralized management  History of employee empowerment  Trust between employees and management

17. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 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—are they recyclable?  Actions of suppliers who produce inputs  Customer habits in consuming and disposing of products and packaging

18. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. Questions How does business process reengineering affect the way that firms execute processes? What are the benefits of adopting an enterprise resource planning system? Why do firms form strategic alliances?

19. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. Potential Ethical Issues Giving executive bonuses combined with worker firings Hiring new, lower-paid employees to replace higher- paid long-term employees Failing to include system controls for sensitive data during ERP installations Holding employees accountable for financial results without providing training to understand financial statements Ignoring the costs to society of pollutants produced Minimizing environmental costs by moving polluting processes to countries with lax regulations