3 responses with references:
1- The balanced scorecard is a useful tool that managers can use to aide in decision making. The balanced scorecard provides measurements on past performance of a company in multiple areas. The textbook defines the balanced scorecard as “a management report that measures four dimensions of organizational performance: financial, internal operations, innovation and learning, and customer perspectives” (Romney, 2020, p.586). You can also think of it as answering these four questions:
- “How do customers see us?”
- “What must we excel at?”
- “Can we continue to improve and create value?”
- How do we look to shareholders?” (Kaplan, 1992).
Managers need to utilize more than financial data to make decisions. The balanced scorecard can help managers with that. The balanced scorecard offers details on multiple factors affecting a company, allowing managers to make more informed decisions. Managers can see if performance meets the goals they set in each category and compare this against previous years. Managers can test whether improvements in one area will have a positive effect on another. For example, if providing customer service training improves customer satisfaction.
2-Responsibility accounting is used to assign responsibility for expenses/revenue of a department within the company to specific managers or individuals. It provides information (reports on expenses/revenue) to managers for decision-making purposes by holding individuals or departments accountable for their performance. By assigning specific responsibilities or cost centers, managers/individuals can take ownership and focus on improving their responsible areas. This allows them to identify areas that require attention, allocate resources effectively, and make informed decisions about resource allocation, staff training, process improvements, etc. The manager/individuals can make informed decisions because they are working with current data/information, leading to better decision-making from managers at the next level. Understanding the relationship among responsibility centers provides an organized information flow, which can enhance decision-making and cost control. (Mahmud, I., et. al. 2018)
Some responsibility controls include:
- Profit Center – With profit control, the manager has responsibility over both the revenue and expenses within their department/area. Departments can be treated like mini businesses inside the larger corporation.
- Revenue Control – With this center, the manager is solely responsible for bringing in and increasing revenue; they are not responsible for business expenses/costs.
Cost Control – These are the non-revenue generating centers (HR, accounting, etc.). They are vital departments within a company but do not generate revenue; they are strictly expense-based.
At my previous company, Cactus Asphalt, we used a pared-down version of responsibility accounting. Each department head (division manager) was responsible for the cost control of their department. They were given budgets by the project management team for each job – depending on the bid, and an annual overhead budget to control and allocate spending as necessary. Our accounting software (Sage) allowed us/them to assign cost codes and track the individual departments. This method was successful for us, forcing the division managers to take accountability while granting flexibility and the room to pivot when needed. Our main drawback was that it was not conducive to interdepartmental teamwork/collaboration.
3-Dashboards are instrumental in enhancing managerial decision-making by offering a visual summary of key data and trends. In addition to balanced scorecards and other tools, “management also needs real-time reports that can be used to take corrective action in a timely manner. Such information is provided in dashboards, which are typically interactive displays of real-time measures of key indicators of operating performance” (Romney et al., 2020). For instance, a financial manager might use a dashboard to monitor real-time revenue, expenses, and cash flow to make informed budgetary decisions. Similarly, an operations manager might rely on a dashboard to track logistics, supply chain disruptions, or production line efficiency, thus allowing for swift action to address issues as they arise. Dashboards, by bringing critical data to the forefront, ensure that managerial decisions are data-driven and timely.