AYB321 Lecture Notes - 0 (Year), Horizon Problem, Economic Value Added
Document Summary
Control = tools and methods used by organizations to keep on track toward achieving their objectives. Typically involves: setting targets (planning, measuring actual performance, comparing actual with target. Investigating variances; and: taking remedial action where necessary. Starts with aggregate measures of performance, then drills down . History: cost control: 1980s: drivers of organizational costs abc to manage & predict costs, 1990s: drivers of revenue bsc. Bsc requires a systematic consideration of how non-financial measures affect financial measures. Familiar and leading lagging short term, but aggregate and direct. Financial measures are still the most widely used because they are an aggregate measure of performance, and a direct measure of the primary purpose of for-profit organizations. General rule: the performance evaluation and reward systems should be consistent with the decision rights allocated to the sub-unit manager. Each sub-unit can be characterised as one of five categories based on its decision rights: cost centres.
