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110 BUACC5933, Assignment, Sem1-2019 BUACC5933, Assignment, Sem1-2019 BUACC5933 Cost and Management Accounting Semester 1, 2019 Assignment Contribution to overall assessment: 25% Due Date: 23/05/2019 at 4pm in Turnitin According to Jensen (2001), “Corporate budgeting is a joke and everyone knows it. It consumes a huge amount of executives' time, forcing them into endless rounds of dull meetings and tense negotiations. It encourages managers to lie and cheat, lowballing targets and inflating results, and it penalizes them for telling the truth. It turns business decisions into elaborate exercises in gaming. It sets colleague against colleague, creating distrust and ill will. And it distorts incentives, motivating people to act in ways that run counter to the best interests of their companies”. During the late 1980s, academics such as Johnson and Kaplan (1987) argued that standard costing and variance analysis were inadequate for cost control and performance evaluation purpose due to the changing competitive environment. Required: Discuss the relevance of traditional budgeting and standard costing in the contemporary business environment. Starting point for your research: Your text 2-papers posted on your Moodle · Jensen (2001) · Hope and Fraser (2003). Additional information: · Required format: Essay (Around 2500 words) · Useful links: · http://federation.edu.au/__data/assets/pdf_file/0018/190044/General-Guide-to-Writing-and-Study-Skills.pdf · https://federation.edu.au/__data/assets/pdf_file/0020/313328/FEDUNI-GENERAL-GUIDE-TO-REFERENCING-2016-EDITION_ed.pdf · This is a group-assignment. Each group needs to have 2 to 3 members in it. Please organise yourselves into groups. · Please make sure that names and ID numbers of all group members are stated on the cover sheet of your submission. As this is a group assignment, each member of your group is awarded the same mark. Working in groups has its pros and cons. I am sure that you will hold constructive group discussions. In case of any disagreements, you will be able to resolve them in a reasonable way. There will be times when you may have to agree to disagree with each other. Invariably different group members bring different skills to a project; it is up to you to make the best of it. I believe one can learn a lot by discussing the issues with one’s colleagues. If you find your group members are “not pulling their weight” or there are problems with any member’s commitment, then please try to resolve those issues amongst yourselves. Open and honest communication always helps. If you are unable to resolve these issues, you are most welcome to see me and we will try to sort out the problems together. Do this as soon as possible and certainly before the due date. For some reason, if you do not wish to work in a group, please let us know. Please adapt this to suit your style. Thanks Geeta -------------------------- · BUACC5933 – Cost and Management Accounting · Semester 1, 2019 Group Assignment Names:Student Numbers: Bases of assessment F P HD Content - Identification of relevant issues. Research - Selection of relevant material. A demonstration of critical evaluation of the material. Expression of your viewpoint (and not a catalogue of quotes/ others’ ideas). Expression - clarity, style (formal and academic), coherence in writing, grammar, punctuation, spellings and sentence structure. A logical flow of argument at both the paragraph level and the overall text level. Use of supporting arguments. Use of literature to support the argument. Structure – Synopsis (Stated the topic, reflected main arguments and identified conclusions reached). Introduction (Provided background/contextual information; clearly introduced the topic; outlined the plan for addressing the topic). Discussion in appropriately linked sections and paragraphs. Conclusion (no new material; reiterated the main line of argument). Referencing procedure (within the text, and at the end of the text). Appropriately styled and punctuated bibliography. Overall Presentation – including cover page, line spacing, page numbering. GRADE: 1 2 New Ways of Setting Rewards: The beyond Budgeting Model California ManagementReview S u m m e r 2 0 0 3 | V o l . 4 5 , N o . 4 | R E P R I N T S E R I E S New Ways of Setting Rewards: The Beyond Budgeting Model Jeremy Hope Robin Fraser © 2003 by The Regents of the University of California CALIFORNIA MANAGEMENT REVIEW VOL. 45, NO. 4 SUMMER 2003104 New Ways of Setting Rewards: THE BEYOND BUDGETING MODEL Jeremy Hope Robin Fraser T he issue of incentives has been the subject of fierce debate withinboth practitioner and academic communities for decades. Somepeople believe passionately in the power of incentives to improveindividual performance. Others believe that in an organization that is well structured and aligned, such additional “bribes” are unnecessary—they are only needed to force people to do what they would not otherwise do natu- rally. In other words, they are a poor and ineffective substitute for good manage- ment practices. However, many senior executives appear to believe that the performance “holy grail” is finding the right mix of targets and incentives (although there are significant differences across countries). For example, with regard to long-term incentives (including share options), a U.S. executive can expect incentives to represent 97% of basic pay, whereas in the UK, France, and Holland the figure is 38%, and in Sweden and Spain they are almost unknown.1 A recent global survey reported that incentives are tied to fixed annual targets in 60 percent of cases.2 Another conclusion from various surveys is the level of dissatisfaction with incentive schemes. In a study by consultants William Mercer, 47% of respondents reported that their employees found the systems neither fair nor sensible, and 51% of employees said that the scheme provided little value to the company. No wonder that the study concluded that most individual merit or performance-based pay plans share two attributes: they absorb vast amounts of management time and resources, and they make everybody unhappy.3 Research by the Beyond Budgeting Round Table (BBRT) over the past five years has shown that fixed performance contracts (fixed targets reinforced by incentives) are one of the primary causes of dysfunctional behavior in organizations today. This article will examine some of the principles that enable leaders to break free from this contract and move to a more lean, adaptive and ethical organization. The Academic Debate Most business leaders believe in the power of individual rewards. They see the organization as a machine whose parts can be managed by understand- ing their “cause-and-effect” relationships. People are an important part of this machine and their performance can be “fine-tuned” by changing extrinsic motiva- tors such as financial inducements. These beliefs can be encapsulated in the expression “Do this and you’ll get that.” Its management origins stem from the principles of scientific management set out by Frederick W. Taylor in 1911. It was based on piecework. However, relating pay to performance when individual output can be precisely measured is one thing, but applying this approach to complex modern organizations—where success is more dependent on design, innovation, quality, and customer service—is another. The problem is that knowledge workers now form a majority of the workforce in most organizations today.4 Whereas workers used to serve machines, machines now serve workers. While yesterday’s car plants and textile factories employed few managers and thousands of “hands,” today’s financial services firms and software companies employ many managers and hundreds of “brains.” Moreover, whereas industrial organizations were designed around sep- arate functions, today’s knowledge-based organizations (including most modern manufacturing firms) are designed around interdependent parts, so setting targets and incentives for each part doesn’t make much sense. Stanford professor Jef- frey Pfeffer makes this perceptive point: “If you could reliably and easily mea- sure and reward individual contributions, you probably would not need an organization at all as everyone would enter markets solely as individuals.”5 Like Pfeffer, Harvard professor Robert Simons believes it is impossible to separate the marginal contributions of individuals. He puts the question in this way: “When Ford launches a successful new automobile, how can senior man- agers calibrate the relative contribution of the design team that created the con- cept, the engineering team that developed and applied the new technologies, the mar- keting team that launched the product, and the division president who oversaw the entire effort? How do we measure the con- tribution of a single violin player in relation to the successful season enjoyed by a sym- phony orchestra?”6 The theoretical basis for individual incentives lies in experiments with dogs, rats, and pigeons. With enough practice you can teach rats to ring a bell every time they want food. The step up to people is a small one. B.F. Skinner, an American who conducted many of these animal experiments, wrote the bible of New Ways of Setting Rewards: The Beyond Budgeting Model CALIFORNIA MANAGEMENT REVIEW VOL. 45, NO. 4 SUMMER 2003 105 Jeremy Hope and Robin Fraser are both directors of the Beyond Budgeting Round Table, an international, not-for-profit management research organization. Their book, Beyond Budgeting—How Managers Can Break Free from the Annual Performance Trap, is available from Harvard Business School Press.
the behaviorist school. He believed that people are nothing more than “reper- toires of behaviors” and these can be explained by outside forces he called “envi- ronmental contingencies.”7 This school of thought is strikingly similar to the “Theory X” view of human resources set out in Douglas McGregor’s classic 1960 book, The Human Side of Enterprise.8 Theory X stated that people hate work, need to be told what to do, dislike responsibility, and will do no more than the minimum stated in their employment contract unless driven to raise their performance by additional incentives. The evidence that incentives lead to higher profit performance is tenuous at best. Jensen and Murphy showed that there was virtually no link between how much CEOs were paid and how well their companies performed for share- holders.9 In a 1998 survey of 771 U.S. companies, Towers Perrin found that only one-third could see any connection between incentives and financial results.10 In 1993, social scientist Alfie Kohn’s article in the Harvard Business Review entitled “Why Incentive Plans Cannot Work” generated more comment that just about any other article in the history of the journal. “Do rewards work? The answer depends on what we mean by ‘work.’ Research suggests that rewards succeed at securing one thing only: temporary compliance. When it comes to producing lasting change in attitudes and behavior, however, rewards—like punishment—are strikingly ineffective. Once rewards run out, people revert to their old behaviors….They do not