Accounting for Management Planning and Control Course Presentation Lina Aleidi ID# 200800119 Chapter 23; Performance Measurement, Compensation, and Multinational Considerations Saturday May 5th, 2012

Outline Introduction Designing Accounting-based Performance Measures Moral hazards Conclusion

Designing Accounting-based Performance Measures Measuring the performance of activities provides a scorecard to report how well improvement efforts are effective. These measurements are an integral part of continuous improvement.

Designing Accounting-based Performance Measures Q 23.2, Pg. X : What are the six steps in designing accounting-based performance measures? Choose performance measures that align with top management's financial goals Choose the time horizon of each performance measure in Step 1 Choose a definition of the components in each performance measure in Step 1 Choose a measurement alternative for each performance measure in Step 1 Choose a target level of performance Choose the timing of feedback

Moral Hazards Q23.10, Pg 848 Describe moral hazard. Moral hazard describes contexts in which an employee prefers to exert less effort (or report distorted information) compared with the effort (or accurate information) desired by the owner because the employee's effort (or validity of the reported information) cannot be accurately monitored and enforced.

Moral Hazards For Example, in some repetitive jobs, the supervisor can monitor the workers’ actions and the moral-hazard problem may not arise. However, a manager’s job is to gather and interpret information and to exercise judgment on the basis of the information obtained. Monitoring a manager’s effort is more difficult.

Conclusion There are six steps in designing accounting-based performance measures which are integral for the continuous improvement of the company. Moral hazard appear when employee prefers to exert less effort or report less accurate information and it is common when the employee's effort cannot be accurately monitored.