PORTFOLIO – ACCT3001
Responsibility accounting refers to the practice of holding managers to be responsible for their activities and performances of divisions. A responsibility accounting system (RAS) fosters goal congruence by establishing the performance criteria by which each manager will be evaluated, and these measures need to be consistent with the organisation's goals (Yuningsih, 2017).
A number of advantages and potential limitations can be expected when considering responsibility accounting system at SuperClean. RAS provides a method that helps to manage an immense diversified organisation, and more effective decision-making at division level. However, the system ought to be managed as a system, not a group of subsystems because conflicts can possibly occur between company's segments such as
A cost centre within a unit is defined as where the manager is responsible for all incurring costs, but not revenue, profit or investments (Langfield Smith, Thorne, Smith and Hilton, 2015).
In this particular case of HiTech instruments, each level of the manager is held accountable for the expenses of their relative departments. The main focus of the prevailing planning phase is to retrieve the information from both sales and marketing divisions. The retrieved information is crucial for the determination of the manufacturing semiconductors in conjunction with the calculation of time and costs for different types of productions. Therefore, the task of calculation is one of the responsibilities of senior management. On the other hand, the lower level of management of the manufacturing managers is obliged to ensure the production output does not exceed budgeted costs.
Hence, the manufacturing plants in the Manufacturing Division are cost centres.
Decentralisation is the concept where decisions are made at divisional and departmental levels within an organisation (Yuningsih 2017). When applying decentralisation to HiTech Instruments' marketing and manufacturing decision making, the biggest challenge is to obtain goal congruence among the autonomous managers. Goal congruence is accomplished when company employees' incentives and the organisational goals are consistent as a whole (Langfield Smith, Thorne, Smith and Hilton, 2015). That being the case, managers of marketing and manufacturing departments should be evaluated based on their performances towards this objective. The evaluation can be effectively attained through a number of methods, for example, performance targets and reward systems.
In particular, performance targets are not merely the guidance for decentralised units' managers as the goals; alternatively, they are evaluation tools for the corporate manager to assess the results of a unit and its responsible manager. Apart from that, a reward system is correspondence to a manager's accomplishments while acting as the encouragement for managers to strive for organisational objectives. Nevertheless, with the poorly designed accounting system and inappropriately chosen performance measures, it could result in unappealing consequences (Langfield Smith, Thorne, Smith and Hilton, 2015).
In this scenario, performance targets for the manufacturing and marketing departments can be the budgets established before certain projects such as a marketing campaign for a new product, or the production of a new semiconductor type. These targets not only provide managers precise directions to achieve their goals but can also be used to compare with the actual outcomes in order to evaluate and reward managers accordingly to the reward systems of the company.
Before giving HiTech Instruments a coherent suggestion in decentralisation, advantages and disadvantages of a decentralised organisation need to be taken into consideration.
The advantages that a decentralised firm possesses are expertise expansion at individual segment, expeditious decision-making, time efficiency at senior managements, and greater enthusiasm of subunit managers (Saylor Academy, 2012). What it means by expanding in expertise at each segment is that rather than having senior managers generating resolutions for the whole organisation, a decentralised structure allows managers of marketing and manufacturing departments to make decisions with their greater professional knowledge and experience on particular areas. As the result, they can timely response to opportunities or problems without waiting for the top management's compliances. The senior management is then able to concentrate on wider important issues at the firm level, such as planning for sustainable development in a long run. In addition, local managers with given authority have a propensity to be more responsible and enthusiastic than ones who purely follow the orders from the top. Hence, these managers can have the higher chances of moving closer to the next levels of management.
Disadvantages, on the other hand, comprise services replication, prospective conflict of interest in accomplishing goal congruence, and control difficulty at the head management level (Saylor Academy, 2012). In detail, administrative services, such as accounting and computer support, are often duplicated in each unit of a decentralised HiTech, while they might be more effectively distributed through one comprehensive department. Moreover, in the case of HiTech company adapting decentralisation, conflicts can arise between divisional managers when achieving goal congruence. Managers who are evaluated in accordance with their division's achievements do not have incentives to give up their personal gain to other department managers in exchange for the benefits of the organisation as a whole. This leads to lack of a big picture view and coordination. Furthermore, decentralisation can cause negative impacts on HiTech's reputation when the senior management levels lose their control over lower managers who have poor decision-making abilities or deficient performances in maintaining the quality required.
In terms of recommendations for HiTech Instruments, if the organisation demands expansions and moving toward larger dimensions and operations, they should definitely decentralise their marketing and manufacturing decisions, but under supervision. However, if they desire to restrict growth, they should continue staying highly centralised.
(Total … words)
...(download the rest of the essay above)