Accounting for performance management notes
Lecture 1
Management
- Optimizing performance:
o Financial versus nonfinancial performance
o Sustainability of the organization in the short and in the long run
§ Social and environmental
§ Innovation, adaptation, new technologies
o Performance for shareholders and stakeholders.
Economics Majors:
- Economic theories about organizations (TCE, GT...) are crucial for business
economists.
- However:
o Important to think about how theories relate to economic management of
organizations in practice;
o We are not just studying how organizations are managed, but also study how
Business Administration Majors:
- Role of culture, leadership, learning, motivating is crucial for business
administration majors.
- However:
o Only effective when organization is financially (and nonfinancially) healthy;
o Culture, leading, learning and motivating often based on financial
information;
o Using financial information without thinking hurts culture, leadership,
learning and motivation
Accounting can support performance management, so you’d better understand it
- Many organizations lack financial literacy and cost consciousness. Do not have
good insights in costs, difficulties to bring back to the problem.
- Result:
o No attention for (hidden) costs
o No accurate analysis of actual causes of failing organizations
- Good accounting practices are crucial to avoid these problems.
,Financial accountants versus management accountants
Tasks of management accountants
- Reports to chief financial officer (CFO)
- Administers internal and external accounting
- Budgetplanning
- Controls financial (and nonfinancial) data collection and reporting
- Growing role as internal consultants or business analysts to the point of being
viewed as business partners
Balance between providing information to other managers for decision-making against
providing monitoring information used to control behavior of lower-level managers.
Managers constantly make decisions about which option is best from amongst a set of
alternatives:
- Special orders
- Outsourcing
- Keep or drop
- Capacity expansion
- Capacity concentration
- Pricing
Relevant, reliable, timely, and accurate accounting information is crucial to assist those
decisions.
Management accounting/controlling profession in the Netherlands
- RC title (registered controller)
o Executive master of finance and control
o VRC: professional organization
o Vacancies: financial controller, business controller
- Changing role of controllers:
o Connector between different departments
o Business partner role:
§ Not only administrative function, also advising
, o Increasingly confronted with digitalization
o Growing importance of sustainable performance
Controller profession: role of connector
With which departments and/or functions within or outside
your organization do you cooperate?
Controller profession: responsibilities
Controller profession: role of digitalization
- Respondents agree that the following phenomena are taking place in their
organizations and expect an increase in the next five years:
o Digitalization of the primary processes
o Digitalization of the administrative and/or financial processes
o Digitalization of the business model
o Collecting/availability of data to support decisionmaking
- This tendency is not so strong in SMEs as in other companies.
Controller profession: role of sustainability
- Controllers are confronted with a demand for sustainability and their function is
affected by this demand:
o As part of the strategy of the organization for which they work
o When offering products and services
o As part of the organizational processes
o Regarding procurement
o As investment criterion
o Sustainability performance is measured and reported externally
o Nonfinancial information is quantified
o Controllers’ functions are geared towards creating nonfinancial value
, - Sustainability is less important in SMEs than in other organizations
- Respondents have the necessary knowledge to integrate sustainability in their
function.
- The EU taxonomy and CSRD will have implications for controllers’ functions, but
are at the same time experienced as an administrative burden.
Controller profession: role of uncertainty
- Current global circumstances are affecting controllers:
o Not specifically financially (revenues, customers’ willingness to pay, not
affected by changing exchange rates)
o Rather practically:
§ Suppliers cannot always deliver
§ Much competition for personnel
§ More time is spent on budgeting
o Targets are being met
§ But less often than five years ago
Controller profession: work satisfaction
- Controllers are very satisfied with their job:
o It is clear how they contribute
o They feel like they have the necessary knowledge and skills
o Challenging function
o Enough time to do what is expected from them
o Not uncertain about the future of their job
o The function will not become superfluous because of digitalization
o They are not planning to switch organizations in the upcoming year
o They are willing to exert more effort than expected
o They don’t feel like they need to make sacrifices
Lecture 1
Management
- Optimizing performance:
o Financial versus nonfinancial performance
o Sustainability of the organization in the short and in the long run
§ Social and environmental
§ Innovation, adaptation, new technologies
o Performance for shareholders and stakeholders.
Economics Majors:
- Economic theories about organizations (TCE, GT...) are crucial for business
economists.
- However:
o Important to think about how theories relate to economic management of
organizations in practice;
o We are not just studying how organizations are managed, but also study how
Business Administration Majors:
- Role of culture, leadership, learning, motivating is crucial for business
administration majors.
- However:
o Only effective when organization is financially (and nonfinancially) healthy;
o Culture, leading, learning and motivating often based on financial
information;
o Using financial information without thinking hurts culture, leadership,
learning and motivation
Accounting can support performance management, so you’d better understand it
- Many organizations lack financial literacy and cost consciousness. Do not have
good insights in costs, difficulties to bring back to the problem.
- Result:
o No attention for (hidden) costs
o No accurate analysis of actual causes of failing organizations
- Good accounting practices are crucial to avoid these problems.
,Financial accountants versus management accountants
Tasks of management accountants
- Reports to chief financial officer (CFO)
- Administers internal and external accounting
- Budgetplanning
- Controls financial (and nonfinancial) data collection and reporting
- Growing role as internal consultants or business analysts to the point of being
viewed as business partners
Balance between providing information to other managers for decision-making against
providing monitoring information used to control behavior of lower-level managers.
Managers constantly make decisions about which option is best from amongst a set of
alternatives:
- Special orders
- Outsourcing
- Keep or drop
- Capacity expansion
- Capacity concentration
- Pricing
Relevant, reliable, timely, and accurate accounting information is crucial to assist those
decisions.
Management accounting/controlling profession in the Netherlands
- RC title (registered controller)
o Executive master of finance and control
o VRC: professional organization
o Vacancies: financial controller, business controller
- Changing role of controllers:
o Connector between different departments
o Business partner role:
§ Not only administrative function, also advising
, o Increasingly confronted with digitalization
o Growing importance of sustainable performance
Controller profession: role of connector
With which departments and/or functions within or outside
your organization do you cooperate?
Controller profession: responsibilities
Controller profession: role of digitalization
- Respondents agree that the following phenomena are taking place in their
organizations and expect an increase in the next five years:
o Digitalization of the primary processes
o Digitalization of the administrative and/or financial processes
o Digitalization of the business model
o Collecting/availability of data to support decisionmaking
- This tendency is not so strong in SMEs as in other companies.
Controller profession: role of sustainability
- Controllers are confronted with a demand for sustainability and their function is
affected by this demand:
o As part of the strategy of the organization for which they work
o When offering products and services
o As part of the organizational processes
o Regarding procurement
o As investment criterion
o Sustainability performance is measured and reported externally
o Nonfinancial information is quantified
o Controllers’ functions are geared towards creating nonfinancial value
, - Sustainability is less important in SMEs than in other organizations
- Respondents have the necessary knowledge to integrate sustainability in their
function.
- The EU taxonomy and CSRD will have implications for controllers’ functions, but
are at the same time experienced as an administrative burden.
Controller profession: role of uncertainty
- Current global circumstances are affecting controllers:
o Not specifically financially (revenues, customers’ willingness to pay, not
affected by changing exchange rates)
o Rather practically:
§ Suppliers cannot always deliver
§ Much competition for personnel
§ More time is spent on budgeting
o Targets are being met
§ But less often than five years ago
Controller profession: work satisfaction
- Controllers are very satisfied with their job:
o It is clear how they contribute
o They feel like they have the necessary knowledge and skills
o Challenging function
o Enough time to do what is expected from them
o Not uncertain about the future of their job
o The function will not become superfluous because of digitalization
o They are not planning to switch organizations in the upcoming year
o They are willing to exert more effort than expected
o They don’t feel like they need to make sacrifices
