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Main Catalogs   Accounting Business Communication Business Law Economics Finance Insurance and Real Estate Management Information Systems Management and Organization Marketing Operations and Decision Sciences      Special Catalogs     Case Studies Text Chapters Mapped to Specific Cases How to Build a Book: Select Content Review & Arrange Personalize Request a Copy Keyword    Title, Author, Case #, Etc. ALEKS Homework Manager Discover Econ   Learning Solutions Group     Harvard Business Review Articles — Accounting and Control  • To include an item in your complimentary custom book, click the item’s Add link. If there is a View link next to an item, you can view the pages by clicking on the link.  • To review the list of items you have selected so far, click on Step 2 in the progress bar above. You have successfully added all of the items to your order. Either click here to review your order or continue to add content from another title.    Pension Roulette: Have You Bet Too Much on Equities?   Add   View  8 pp.  Article Author(s): Stewart, G. Bennett Publication Date: 06/01/2003 Product Type: Harvard Business Review Article Publisher: Harvard Business School Publishing HBS Number: R0306G Subjects: Accounting policies; Accounting procedures; Bonds; Pension plans Academic Discipline: Accounting & control Product Description: In the 1990s, funding pension obligations by investing in stocks looked smart. By 1999, the bull market had poured a collective $260 billion surplus into the pension coffers of the S&P 500, permitting the companies to record the year-to-year increases as additional income. But just two years later, the bear market had obliterated those gains, replacing them with a cavernous $240 billion deficit — which had to be offset by the unlucky firms' ongoing cash flows, wreaking havoc on their earnings, debt levels, and stock prices. Corporate executives may be blamed for this debacle. But they were only following the rules. Current accounting guidelines keep companies from recording pension liabilities and assets on their balance sheets, instead relegating them to the footnotes. That makes it hard to see the risk to which market drops expose companies. Board members and top executives need to look beyond distorted accounting numbers to the economic realities of pension plans. Once they do, they may be surprised to find that they would gain far greater value and flexibility by passively investing their pension funds entirely in bonds. A bond portfolio can be designed to meet precisely, and with virtual certainty, a company's pension obligation, thus eliminating the chance of a funding gap. The predictability of bond investments also stabilizes earnings and cash flow. The expanded corporate debt capacity that results can then be used to fuel growth or reduce the firm's overall cost of capital.    ABC’s of ABC: Activity-Based Costing and Management   Add   View  4 pp.  Article Author(s): Billington, Jim Publication Date: 05/01/1999 Product Type: Harvard Management Update Article Product Description: Unlike traditional accounting methods, activity-based costing, or ABC, counts the actual activities that go into making a specific product (or delivering a specific service), and attempts to figure the costs of those activities. ABC also focuses on ``cost drivers'' that can guide allocations. Activity-based management, or ABM, takes the concept further, using cost information to evaluate an entire operation. The goal is to distinguish between value-added costs (necessary) and non-value added costs (unnecessary) and minimize the latter. This article discusses ABC and ABM in a Q & A format. Includes an annotated ``If you want to learn more'' section. HBS Number: U9905D Subjects: Activity based costing; Cost accounting; Cost allocation; EVA; Performance measurement Academic Discipline: Accounting & control    Accounting Choices and EVA   Add   View  7 pp.  Article Author(s): McIntyre, Edward V. Publication Date: 01/15/1999 Product Type: Business Horizons Article Publisher: Business Horizons/Indiana University Product Description: The accounting construct known as Economic Value Added (EVA) has met with growing interest, and is described by some as the real key to creating wealth. The main argument proposed in favor of EVA over ROA is that the former will encourage managers to undertake desirable investments that the latter would discourage. But EVA, like any numbers derived from a firm's accounting system, can be affected by the methods used in determining operating income and asset values. A series of examples illustrate how accounting method choice can heavily influence reported EVA, and that alleged distortions caused by a particular accounting procedure may make matters worse rather than better. HBS Number: BH007 Subjects: Accounting; Accounting procedures; EVA; Financial analysis Academic Discipline: Accounting & control    Accounting Transparency Gap (Guest Column)   Add   View  4 pp.  Article Author(s): Fuller, Joseph Publication Date: 05/01/2002 Product Type: Harvard Management Update Article Product Description: The Enron debacle hammered home to the wider public what accounting insiders have been aware of for a long time -- accounting practices have failed to keep pace with the complexity of business. Shareholders, regulators, and middle-level managers are often kept in the dark about how a company creates value. Joseph Fuller, the CEO of Monitor Group, a global family of professional services firms headquartered in Cambridge, MA, explains how transparency and clarity can begin to fix the widespread problem of inadequate accounting. HBS Number: U0205E Subjects: Accounting policies; Accounting standards; Communication in organizations; Corporate responsibility; Financial management; Fiscal policy; GAAP; Organizational problems Academic Discipline: Accounting & control    Activity-Based Costing for the Small Business: A Primer   Add   View  8 pp.  Article Author(s): Baxendale, Sidney J. Publication Date: 01/15/2001 Product Type: Business Horizons Article Publisher: Business Horizons/Indiana University Product Description: Owners of small firms are not likely to give much thought to an accounting system during the planning or implementation phases of their business. The business plan forces them to use pro forma financial statements, and soon afterwards they will need certified accounting methods for meeting the needs of investors, lenders, and taxing authorities. But systems designed solely for those needs often fail to provide the managerial accounting information necessary to operate the venture -- to make sound operating, strategic, and tactical decisions. The traditional accounting system relied on to do this is ``absorption costing.'' Absorption costing, however, does not include costs of marketing and distribution. This article demonstrates how activity-based costing (ABC) provides a better framework for gauging the profitability of product lines and avoids some of the distortions caused by absorption costing. ABC is particularly useful in service firms by identifying activities, specifying cost drivers for each activity, calculating charging rates for each activity, and allocating costs to each product/service. In particular, ABC enables the firm to isolate the costs of unused capacity. Simple examples are provided and worked through one step at a time to illustrate the differences in logic and conclusions yielded by ABC as opposed to absorption costing. HBS Number: BH058 Subjects: Accounting; Activity based costing; Entrepreneurial finance; Entrepreneurship; Management accounting Academic Discipline: Accounting & control    Advantages of Fund Accounting in “Nonprofits”   Add   View  13 pp.  Article Author(s): Herzlinger, Regina E.; Sherman, H. David Publication Date: 05/01/1980 Product Type: Harvard Business Review Article Product Description: Many executives have attempted to simplify the reporting procedures of fund accounting by using business practices. However, nonprofit enterprises have financial structures and objectives different from those of business. Managers of nonprofit institutions need greater familiarity with the requirements of nonprofit financial structures and accounting practices. A review of the components of fund accounting and an illustrative case help clarify the principles. HBS Number: 80307 Subjects: Budgeting; Financial management; Nonprofit accounting; Nonprofit organizations Academic Discipline: Accounting & control    Another Hidden Edge: Japanese Management Accounting   Add   View  6 pp.  Article Author(s): Hiromoto, Toshiro Publication Date: 07/01/1988 Product Type: Harvard Business Review Article Product Description: The most essential difference between management accounting in the United States and Japan is philosophical. Accounting plays more of an ``influential'' than an ``informational'' role in Japan. In general, Japanese accounting systems are designed to be consistent with corporate strategy, not independent of it. There is a more direct linkage than in the United States between management accounting practices and overall corporate goals. HBS Number: 88406 Subjects: Accounting procedures; Corporate strategy; Financial management; Japan; Management accounting Academic Discipline: Accounting & control    Appendix A: Checklist Summary of the Levers of Control   Add   View  7 pp.  Article Author(s): Simons, Robert Publication Date: 11/09/1994 Product Type: HBS Press Chapter HBS Number: 2418BC Subjects: Accounting procedures; Control systems; Corporate culture; Organizational learning; Risk management; Strategy implementation; Values; Vision Academic Discipline: Accounting & control Product Description: This chapter summarizes the what, why, how, when, and who of the four basic levers managers use to control the formation and implementation of business strategy. May be used with: (2419BC) Appendix B: Use and Misuse of Information Technology: Levers of Control Revisited; (2417BC) The Dynamics of Controlling Strategy; (2416BC) The Control Levers in Action: Controlling Business Strategy; (2415BC) Interactive Control Systems: Adapting to Competitive Environments; (2414BC) Diagnostic Control Systems: Implementing Intended Strategies; (2413BC) Beliefs and Boundaries: Framing the Strategic Domain; (2412BC) A Balancing Act: Tensions to Be Managed: Strategy, Organizations, and Control; (2411BC) Introduction: Strategy, Organizations, and Control.    Appendix B: Use and Misuse of Information Technology: Levers of Control Revisited   Add   View  15 pp.  Article Author(s): Simons, Robert Publication Date: 11/09/1994 Product Type: HBS Press Chapter HBS Number: 2419BC Subjects: Accounting procedures; Control systems; Corporate culture; Information technology; Organizational learning; Risk management; Strategy implementation; Values Academic Discipline: Accounting & control Product Description: This chapter discusses the use and misuse of information technology in applying the concepts around the four levers of control in practice. May be used with: (2411BC) Introduction: Strategy, Organizations, and Control; (2412BC) A Balancing Act: Tensions to Be Managed: Strategy, Organizations, and Control; (2413BC) Beliefs and Boundaries: Framing the Strategic Domain; (2414BC) Diagnostic Control Systems: Implementing Intended Strategies; (2415BC) Interactive Control Systems: Adapting to Competitive Environments; (2416BC) The Control Levers in Action: Controlling Business Strategy; (2417BC) The Dynamics of Controlling Strategy; (2418BC) Appendix A: Checklist Summary of the Levers of Control.    AT&T Canada: A New Strategic Governance System Quadruples Market Value   Add   View  8 pp.  Article Publication Date: 01/15/2000 Product Type: Balanced Scorecard Report Article Product Description: At AT&T Canada, getting business unit leaders to focus on the right things required a new governance model. The company made the Balanced Scorecard the centerpiece of a new approach to decision making and the platform for a strategic management system that sought to eliminate organizational barriers and realize cross-functional synergies. The results were dramatic: within a three-year span, the company's account base grew from 350,000 customers to 750,000, and revenue per employee increased by 36%. The accompanying interview with Renato Dicenza, vice president of network services and business process improvement at AT&T (``A New Governance Model Transforms Belief Systems'') highlights changing employees' beliefs as the linchpin of the turnaround. HBS Number: B0001B Subjects: Balanced scorecard; Corporate control; Corporate governance; Corporate strategy; Leadership; Management controls; Strategy formulation Academic Discipline: Accounting & control    Audit Committees Can’t Add   Add   View  8 pp.  Article Author(s): Weil, Roman L. Publication Date: 05/01/2004 Product Type: Harvard Business Review Article Product Description: University of Chicago's Roman Weil charges that many audit committee members are financially illiterate -- and he has the test results to prove it. HBS Number: F0405D Subjects: Accounting & control; Accounting policies; Accounting standards; Auditing; Financial reporting Academic Discipline: Accounting & control    Balanced Scorecard at Sears: A Compelling Place for Feedback and Learning   Add   View  5 pp.  Article Author(s): Kirn, Steven P. Publication Date: 07/15/2000 Product Type: Balanced Scorecard Report Article Product Description: Steve Kirn, vice president of innovation and organizational development at Sears, describes how the willingness to acknowledge that management methods were flawed helped turn around the general merchandise retailer. Among the keys to the dramatic improvement: new strategies built upon the interrelationships of key dimensions of the business and the creation of a culture focused on feedback and learning. HBS Number: B0007C Subjects: Balanced scorecard; Corporate strategy; Learning; Management of change; Multinational corporations; Performance measurement; Strategy formulation Academic Discipline: Accounting & control    Balanced Scorecard for Public-Sector Organizations   Add   View  5 pp.  Article Author(s): Kaplan, Robert S. Publication Date: 11/15/1999 Product Type: Balanced Scorecard Report Article Product Description: Robert S. Kaplan explains how the Balanced Scorecard (BSC) can be applied to public-sector organizations, using the city of Charlotte, North Carolina as an example. For a government agency, financial measures are not the most relevant indicators of whether the organization is delivering on the rationale for its existence. Instead, public-sector organizations need to measure how effectively and efficiently they are meeting the needs of their constituencies. May be used with: (B0103D) The Balanced Scorecard and Quality Programs. HBS Number: B9911C Subjects: Balanced scorecard; Cities; Local government; Nonprofit sector Academic Discipline: Accounting & control    Balanced Scorecard: Measures That Drive Performance   Added   View  12 pp.  Article Author(s): Kaplan, Robert S.; Norton, David P. Publication Date: 01/01/1992 Product Type: Harvard Business Review Article Product Description: During a year-long research project, the authors developed a ``balanced scorecard'' performance measurement system that allows executives to view a company from several perspectives simultaneously. The scorecard includes financial measures that reveal the results of actions already taken, as well as three sets of operational measures that show customer satisfaction, internal processes, and the organization's ability to learn and improve. Creating a balanced scorecard requires translating a company's strategy and mission statement into specific goals and measures. Managers then track those measures as they work toward their goals. Putting the Balanced Scorecard to Work, Reprint #93505, presents the implementation of this concept. HBS Number: 92105 Subjects: Accounting & control; Accounting procedures; Balanced scorecard; Control systems; Corporate strategy; Financial analysis; Organizational learning; Performance measurement; Quality control; Strategy formulation Academic Discipline: Accounting & control    Balanced Scorecard: Measures That Drive Performance (HBR OnPoint Enhanced)   Added   View  16 pp.  Article Author(s): Kaplan, Robert S.; Norton, David P. Publication Date: 02/01/2000 Product Type: HBR OnPoint Article Product Description: HBR OnPoint Articles save you time by enhancing an original Harvard Business Review article with an overview that draws out the main points and an annotated bibliography that points you to related resources. This enables you to scan, absorb, and share the management insights with others. During a year-long research project, the authors developed a ``balanced scorecard'' performance measurement system that allows executives to view a company from several perspectives simultaneously. The scorecard includes financial measures that reveal the results of actions already taken, as well as three sets of operational measures that show customer satisfaction, internal processes, and the organization's ability to learn and improve. Creating a balanced scorecard requires translating a company's strategy and mission statement into specific goals and measures. Managers then track those measures as they work toward their goals. Putting the Balanced Scorecard to Work, Reprint #93505, presents the implementation of this concept. HBS Number: 4096 Subjects: Accounting & control; Accounting procedures; Balanced scorecard; Control systems; Corporate strategy; Financial analysis; Organizational learning; Performance measurement; Quality control; Strategy formulation Academic Discipline: Accounting & control    Balancing Act: Tensions to Be Managed: Strategy, Organizations, and Control   Add   View  20 pp.  Article Author(s): Simons, Robert Publication Date: 11/09/1994 Product Type: HBS Press Chapter HBS Number: 2412BC Subjects: Accounting procedures; Control systems; Corporate culture; Organizational learning; Risk management; Strategy alignment; Strategy implementation; Value creation Academic Discipline: Accounting & control Product Description: This chapter introduces the tensions that arise in attempting to align organizations, business strategy, and human behavior. Balancing these tensions is at the heart of implementing strategy. May be used with: (2419BC) Appendix B: Use and Misuse of Information Technology: Levers of Control Revisited; (2418BC) Appendix A: Checklist Summary of the Levers of Control; (2417BC) The Dynamics of Controlling Strategy; (2416BC) The Control Levers in Action: Controlling Business Strategy; (2415BC) Interactive Control Systems: Adapting to Competitive Environments; (2414BC) Diagnostic Control Systems: Implementing Intended Strategies; (2413BC) Beliefs and Boundaries: Framing the Strategic Domain; (2411BC) Introduction: Strategy, Organizations, and Control.    Beliefs and Boundaries: Framing the Strategic Domain   Add   View  28 pp.  Article Author(s): Simons, Robert Publication Date: 11/09/1994 Product Type: HBS Press Chapter HBS Number: 2413BC Subjects: Accounting procedures; Control systems; Corporate culture; Organizational behavior; Organizational learning; Strategy implementation; Values Academic Discipline: Accounting & control Product Description: As an organization's opportunities expand and the pressures for performance increase, a clear belief system and enforceable boundary system become increasingly important to organizational life. This chapter examines the countervailing forces generated by belief systems and boundary systems, and suggests how managers can control these levers to support business strategy. May be used with: (2419BC) Appendix B: Use and Misuse of Information Technology: Levers of Control Revisited; (2418BC) Appendix A: Checklist Summary of the Levers of Control; (2417BC) The Dynamics of Controlling Strategy; (2416BC) The Control Levers in Action: Controlling Business Strategy; (2415BC) Interactive Control Systems: Adapting to Competitive Environments; (2414BC) Diagnostic Control Systems: Implementing Intended Strategies; (2412BC) A Balancing Act: Tensions to Be Managed: Strategy, Organizations, and Control; (2411BC) Introduction: Strategy, Organizations, and Control.    Beware of Economists Bearing Greek Symbols   Add   View  4 pp.  Article Author(s): Derman, Emanuel Publication Date: 10/01/2005 Product Type: Harvard Business Review Article Product Description: Underneath every economic model involving math lies a substrate of great simplification and imagination, says Columbia University's Emanuel Derman. HBS Number: F0510A Subjects: Economic models; Forecasting Academic Discipline: Accounting & control    BEWARE: The Unbalanced Scorecard   Add   View  4 pp.  Article Author(s): Norton, David P. Publication Date: 03/15/2000 Product Type: Balanced Scorecard Report Article Product Description: Countering a report claiming that the Balanced Scorecard has not made an appreciable difference in the performance of companies that have implemented it, David Norton argues that many companies are not fully applying Balanced Scorecard principles. If you want your scorecard to be truly ``balanced,'' he continues, you should track 23-25 measures -- and nearly 80% of those measures should be nonfinancial. HBS Number: B0003E Subjects: Balanced scorecard; Corporate control; Corporate governance; Corporate strategy; Management controls; Performance measurement; Strategy formulation; Strategy implementation Academic Discipline: Accounting & control    Beyond Budgeting: Pathways to the Emerging Model   Add   View  5 pp.  Article Author(s): Hope, Jeremy Publication Date: 05/15/2000 Product Type: Balanced Scorecard Report Article Product Description: Jeremy Hope, recognized expert on strategic management, shares his views on the relationship between empowerment and strategic performance for overcoming problems associated with top-down management. To achieve sustained success, you need to implement both approaches and circumvent the constraints of traditional budgeting. HBS Number: B0005B Subjects: Balanced scorecard; Budgeting; Corporate strategy; Operations management; Performance measurement; Strategy formulation Academic Discipline: Accounting & control    Born to Herd   Add   View  4 pp.  Article Author(s): Hormats, Robert D. Publication Date: 12/01/2004 Product Type: Harvard Business Review Article Product Description: Herd behavior among investors has produced many of capitalism's great achievements, says Robert D. Hormats of Goldman Sachs International. HBS Number: F0412A Subjects: Economic analysis; Human behavior; Investments Academic Discipline: Accounting & control    British Telecommunications Worldwide and Culture and the Balanced Scorecard   Add   View  8 pp.  Article Author(s): Creelman, James Publication Date: 07/15/2000 Product Type: Balanced Scorecard Report Article Product Description: This reprint contains two articles: 1) From accelerated planning and implementation cycles to new ways of working with joint venture partners: a look at how a global communications company is adapting its Balanced Scorecard to the demands of e-commerce. 2) A performance methodology has to resonate with the fundamental values of the organization, argues Ray Bell, director of organizational excellence at British Telecommunications (BT). BT's culture comprises five core values: putting the customer first, being professional, working as one team, respecting each other, and being committed to continuous improvement. For Bell, having the scorecard reflect the culture is so important that he is in favor of making culture the fifth perspective of a Balanced Scorecard. HBS Number: B0007D Subjects: Balanced scorecard; Corporate culture; Corporate strategy; Implementation; Internet; Joint ventures; Knowledge management; Learning; Performance measurement; Strategy formulation Academic Discipline: Accounting & control    Budget Choice: Planning vs. Control   Add   View  10 pp.  Article Author(s): Churchill, Neil C. Publication Date: 07/01/1984 Product Type: Harvard Business Review Article Product Description: Budgets have two primary functions: planning and control. Companies must decide which function is most important and then resolve a number of formulation issues. Most companies use budgets to evaluate, to some extent, division managers' performances and tie bonuses to the attainment of targeted goals. But while large companies concerned about operational efficiency may want to focus on the coordination and control aspects of budgeting, small and innovative companies may be more concerned with planning aspects. How well a budget succeeds depends on the management systems in place and on the way senior executives view the budgeting process. HBS Number: 84403 Subjects: Budgeting; Control systems; Planning; Small business Academic Discipline: Accounting & control    Building a Strategy-Focused Organization   Add   View  7 pp.  Article Author(s): Kaplan, Robert S.; Norton, David P. Publication Date: 09/15/1999 Product Type: Balanced Scorecard Report Article Product Description: Strategy has never been more important than it is today, write Balanced Scorecard creators Robert Kaplan and David Norton. But the real driver of success in the new economy is the execution of strategy -- and this article highlights core principles that help companies do just that. The six principles are: 1) build an executive leadership team to mobilize change, 2) translate the strategy into operational plans, 3) link and align the organization around its strategy, 4) make strategy everyone's job, 5) link strategy and budgeting, and 6) make strategy a continuous process. HBS Number: B9909A Subjects: Balanced scorecard; Budgeting; Corporate strategy; Strategy implementation Academic Discipline: Accounting & control    Building Business Acumen with the Balanced Scorecard   Add   View  4 pp.  Article Publication Date: 03/15/2000 Product Type: Balanced Scorecard Report Article Product Description: How can companies improve their employees' ability to understand competitive realities and current business dynamics? A Balanced Scorecard simulation is helping Lucent Technologies promote a systems approach to decision making throughout the workforce. HBS Number: B0003D Subjects: Balanced scorecard; Corporate control; Corporate governance; Corporate strategy; Human resources management; Learning; Management controls; Performance measurement; Simulation; Strategy formulation; Strategy implementation Academic Discipline: Accounting & control    Can Bad Things Happen to Good Scorecards?, Parts I and II   Add   View  6 pp.  Article Author(s): Kaplan, Robert S. Publication Date: 12/15/1999 Product Type: Balanced Scorecard Report Article Product Description: This reprint is a combination of Article Reprints B9909D and B9911D. In part one, Harvard Business School Professor Robert Kaplan examines three common pitfalls that can sidetrack a Balanced Scorecard's program: 1) a lack of commitment from senior management, 2) a senior manager who tries to build a scorecard on his or her own, and 3) the failure to let scorecard responsibilities ``cascade down'' to middle managers, individual business units -- and indeed, throughout the entire organization. Part two is a continuation of the discussion in the first issue about how faulty organizational processes can undermine a well-designed scorecard. The three procedural mistakes described in this article: treating the scorecard as a one-time event, mistaking the Balanced Scorecard for a systems project, and introducing the BSC only for the purposes of compensation. HBS Number: B9911X Subjects: Balanced scorecard; Strategy implementation Academic Discipline: Accounting & control    Case for Historical Costs   Add   View  16 pp.  Article Author(s): Anthony, Robert N. Publication Date: 11/01/1976 Product Type: Harvard Business Review Article HBS Number: 76602 Subjects: Accounting policies; Cost accounting; Cost systems; Inflation accounting; McKinsey Award winners Academic Discipline: Accounting & control Product Description: For some time now, accountants, economists, and executives have been engaged in debate: Given the inflationary economy we are in, do balance sheets, income statements, and other financial statements based on historical-cost accounting give a valid picture of a company's operations and financial position? If not, what form of replacement-cost, or price-level-adjusted, accounting should be used instead? The United States' continued high rate of inflation has convinced many people that statements based on historical-dollar conventions are no longer realistic indicators of financial position or operating results. Mr. Anthony is not one of those people, and in this article he makes the case for keeping the traditional historical-cost method.    Cash Flow — It’s Not the Bottom Line   Add   View  8 pp.  Article Author(s): Casey, Cornelius J.; Bartczak, Norman J. Publication Date: 07/01/1984 Product Type: Harvard Business Review Article Product Description: Operating cash flow (OCF) is an increasingly popular measure of a company's performance, but a study of nearly 300 businesses raises doubt about its reliability as a financial indicator. The study matches 60 companies that had filed for bankruptcy between 1971 and 1982 with 230 nonbankrupt companies chosen randomly from the Compustat Industrial Tape. The study found that OCF figures (OCF, OCF/current liabilities, and OCF/total liabilities) over five years before filing for bankruptcy were poor predictors of failure. HBS Number: 84402 Subjects: Accounting procedures; Bankruptcy; Cash flow; Financial management Academic Discipline: Accounting & control    Charities Need a Bottom Line Too   Add   View  6 pp.  Article Author(s): Harvey, Philip D.; Snyder, James D. Publication Date: 01/01/1987 Product Type: Harvard Business Review Article Product Description: Without a system to measure goals and performance, managers of nonprofits often mistakenly continue with projects that no longer serve organizational goals or start activities of questionable usefulness just because there's money in the till. They tend to fear accountability and think that systemizing their organization will take the romance out of their mission. But only when nonprofits institute and rigorously maintain a system of standards will they become purposeful, effective, and efficient. HBS Number: 87109 Subjects: Control systems; Nonprofit organizations; Planning; Project evaluation; Project management Academic Discipline: Accounting & control    Cigna P&C: A Turnaround Vision, Moving from the Bottom to the Top   Add   View  7 pp.  Article Publication Date: 12/15/1999 Product Type: Balanced Scorecard Report Article Product Description: This reprint is a combination of Article Reprints B9909C and B9911E. In the first article, Cigna Property and Casualty used the Balanced Scorecard to leverage front-line managers' insight into how well the overall strategy was being executed. By putting strategy on everyone's desktop, Cigna was able to leapfrog from the bottom quartile to the top quartile of its industry. An accompanying interview with Gerry Isom, CEO of Cigna P&C, highlights the hurdles that needed to be overcome in order to bring about this cultural transformation. The second article includes an interview with Tom Valerio, executive vice president and transformation officer of Cigna Property & Casualty. Valerio led the day-to-day implementation of the Balanced Scorecard at Cigna. His comments reveal how the BSC can be used as a tool for change management. HBS Number: B9911Y Subjects: Balanced scorecard; Insurance; Strategy implementation Academic Discipline: Accounting & control    Cisco’s Virtual Close   Add   View  3 pp.  Article Author(s): Carter, Larry Publication Date: 04/01/2001 Product Type: Harvard Business Review Article Product Description: Cisco's CFO Larry Carter explains how the company has made real-time accounting a reality. The key, he says, lies more in the process than the technology. HBS Number: F0104A Subjects: Accounting; Accounting procedures; CFO; Financial accounting Academic Discipline: Accounting & control    Coming Up Short on Nonfinancial Performance Measurement   Add   View  12 pp.  Article Author(s): Ittner, Christopher D.; Larcker, David F. Publication Date: 11/01/2003 Product Type: Harvard Business Review Article HBS Number: R0311F Subjects: Accounting; Accounting & control; Action planning; Balanced scorecard; Corporate culture; Customer relations; Employee attitude; Employee morale; Finance & accounting; Financial analysis; Financial management; Future; General management; Loyalty; Managerial economics; Managerial skills; Models; Organizational behavior; Performance appraisal; Performance effectiveness; Performance measurement; Planning; Quantitative analysis; Sales & marketing; Service management Academic Discipline: Accounting & control Product Description: Increasingly, companies are measuring customer loyalty, employee satisfaction, and other nonfinancial areas of performance that they believe affect profitability. But they've failed to relate these measures to their strategic goals or establish a connection between activities undertaken and financial outcomes achieved. Failure to make such connections has led many companies to misdirect their investments and reward ineffective managers. Extensive field research now shows that businesses make some common mistakes when choosing, analyzing, and acting on their nonfinancial measures. Among these mistakes: They set the wrong performance targets because they focus too much on short-term financial results, and they use metrics that lack strong statistical validity and reliability. As a result, the companies can't demonstrate that improvements in nonfinancial measures actually affect their financial results. The authors lay out a series of steps that allow companies to realize the genuine promise of nonfinancial performance measures. First, develop a model that proposes a causal relationship between the chosen nonfinancial drivers of strategic success and specific outcomes. Next, take careful inventory of all the data within your    Communication and Education to Make Strategy Everyone’s Job   Add   View  6 pp.  Article Author(s): Kaplan, Robert S. Publication Date: 03/15/2000 Product Type: Balanced Scorecard Report Article Product Description: Once you've formulated your company's strategy -- built scorecards for corporate, the divisions, business units, shared services, and strategic partners -- what comes next? To make the strategy happen, you've got to get all your employees aligned to it, so that they make strategy part of their everyday job. This article focuses on the communication and education programs necessary in order to bring this alignment about. One of the tools it highlights is the ``strategy tree'' -- a way of illustrating how all the elements of a company's strategy interrelate. HBS Number: B0003A Subjects: Balanced scorecard; Communication; Corporate control; Corporate governance; Corporate strategy; Learning; Management controls; Performance measurement; Strategy formulation; Strategy implementation Academic Discipline: Accounting & control    Confessions of a So-So Controller   Add   View  6 pp.  Article Author(s): Du Toit, Derek F. Publication Date: 07/01/1985 Product Type: Harvard Business Review Article Product Description: Entrepreneurs are often careless administrators; their enthusiasm for expanding their businesses can cause them to neglect daily operations. The founder of a cookware manufacturing and sales company recalls the control problems that plagued his organization over 12 years of growth and prosperity and shares the lessons he learned. To cope with the strains of growth and to ensure that proper administrative controls are in place, entrepreneurs should hire capable managers, give them responsibility and authority, and consult with them regularly. Few entrepreneurs can easily give up authority and responsibility. Their businesses will most profit, however, if they concentrate their own efforts on the tasks they do well and delegate other functions to managers best suited for them by temperament and training. HBS Number: 85407 Subjects: Control systems; Delegation of authority; Entrepreneurial management Academic Discipline: Accounting & control    Control Levers in Action: Controlling Business Strategy   Add   View  28 pp.  Article Author(s): Simons, Robert Publication Date: 11/09/1994 Product Type: HBS Press Chapter HBS Number: 2416BC Subjects: Accounting procedures; Control systems; Corporate culture; Organizational behavior; Organizational learning; Strategic initiatives; Strategy implementation; Values Academic Discipline: Accounting & control Product Description: Providing insight into how control systems influence behaviors and drive strategic renewal, this chapter describes the results of a study of 10 newly appointed managers and their use of the four control levers. May be used with: (2419BC) Appendix B: Use and Misuse of Information Technology: Levers of Control Revisited; (2418BC) Appendix A: Checklist Summary of the Levers of Control; (2417BC) The Dynamics of Controlling Strategy; (2415BC) Interactive Control Systems: Adapting to Competitive Environments; (2414BC) Diagnostic Control Systems: Implementing Intended Strategies; (2413BC) Beliefs and Boundaries: Framing the Strategic Domain; (2412BC) A Balancing Act: Tensions to Be Managed: Strategy, Organizations, and Control; (2411BC) Introduction: Strategy, Organizations, and Control.    Control Tomorrow’s Costs Through Today‘s Designs   Add   View  12 pp.  Article Author(s): Cooper, Robin; Chew, W. Bruce Publication Date: 01/01/1996 Product Type: Harvard Business Review Article Product Description: In the past, companies took a cost-plus approach to pricing, charging high prices when a product was first released, then lowering prices when production was scaled up. Lean competitors make that approach impossible, however, as they are quick to introduce competitive ``me too'' products to market. To gain and hold market leadership today, a company must design the cost out of its products from the outset. Target costing is a cost-management technique that lets a company do just that: The company determines how much customers are willing to pay for a product and then designs the product within cost limits that will permit it to sell profitably at the predetermined price. HBS Number: 96104 Subjects: Cost allocation; Innovation; Pricing strategy; Product design; Product development Academic Discipline: Accounting & control    Control with Fairness in Transfer Pricing   Add   View  14 pp.  Article Author(s): Eccles, Robert G. Publication Date: 11/01/1983 Product Type: Harvard Business Review Article Product Description: Interviews with nearly 150 executives in 13 companies show that transfer pricing schemes are a means of generating information and control for implementing corporate, business unit, and product strategy. A company's transfer pricing policy, which includes whether to source inside or out, and the way it is administered depend on the situation and the direction of the organization. Companies can be categorized into four ``pure'' types: competitive, cooperative, collaborative, and collective. Each type has its own set of problems and characteristics. Problems common to all types include performance problems, interpersonal disputes, power imbalances, demand fluctuations, and product pricing. Regardless of the approach used to set the transfer price, unit managers will agree to it if they feel that top management is treating them fairly. HBS Number: 83606 Subjects: Organizational structure; Pricing strategy; Transfer pricing Academic Discipline: Accounting & control    Corporate Scorecard: Making the Whole Greater Than the Sum of the Parts   Add   View  5 pp.  Article Author(s): Norton, David P. Publication Date: 01/15/2000 Product Type: Balanced Scorecard Report Article Product Description: A strategy-focused scorecard requires more than each business unit managing with its own Balanced Scorecard. For maximum effectiveness, the strategies and scorecards of every unit should be aligned and linked together. This is where a corporate scorecard comes into play. A corporate scorecard should look markedly different from that of a single business unit, explains author David P. Norton. It should supply the strategic architecture of the organization and integrating the activities of otherwise segregated units, thereby creating value-adding synergies. HBS Number: B0001A Subjects: Balanced scorecard; Corporate control; Corporate strategy; Management controls; Strategy formulation Academic Discipline: Accounting & control    Cutting Costs Without Drawing Blood   Add   View  8 pp.  Article Author(s): Copeland, Thomas E. Publication Date: 09/01/2000 Product Type: Harvard Business Review Article Product Description: When looking for ways to cut costs, most managers reach for the head-count hatchet, and the markets usually roar with approval. But a company can almost always create far more sustainable value by rigorously evaluating the small-ticket capital items that often get rubber-stamped. Drawing on his experience as a consultant and providing numerous anecdotes, the author contends that those ``little'' requests often prove to be gold plated or unnecessary. A disciplined evaluation involves asking only eight questions and conducting postmortems -- regular audits of units' capital spending. But the payoff is enormous. Because cutting the capital budget increases cash flow, the author argues that a permanent cut of just 15% in the planned level of capital spending could boost some companies' market capitalization by as much as 30%. HBS Number: R00503 Subjects: Accounting & control; Budgeting; Capital budgeting; Capital expenditures; Capital investments; Layoffs Academic Discipline: Accounting & control    Diagnostic Control Systems: Implementing Intended Strategies   Add   View  34 pp.  Article Author(s): Simons, Robert Publication Date: 11/09/1994 Product Type: HBS Press Chapter HBS Number: 2414BC Subjects: Accounting procedures; Control systems; Organizational learning; Performance measurement; Risk management; Strategy execution; Strategy implementation Academic Discipline: Accounting & control Product Description: Diagnostic control systems are the backbone of traditional management control, designed to ensure predictable goal achievement. Unfortunately, managers typically pay little attention to these feedback systems. This chapter discusses the importance of diagnostic control systems, performance measurement, and goal achievement for the execution of business strategy. May be used with: (2419BC) Appendix B: Use and Misuse of Information Technology: Levers of Control Revisited; (2418BC) Appendix A: Checklist Summary of the Levers of Control; (2417BC) The Dynamics of Controlling Strategy; (2416BC) The Control Levers in Action: Controlling Business Strategy; (2415BC) Interactive Control Systems: Adapting to Competitive Environments; (2411BC) Introduction: Strategy, Organizations, and Control; (2413BC) Beliefs and Boundaries: Framing the Strategic Domain; (2412BC) A Balancing Act: Tensions to Be Managed: Strategy, Organizations, and Control.    Double-Loop Management: Making Strategy a Continuous Process   Add   View  5 pp.  Article Author(s): Kaplan, Robert S.; Norton, David P. Publication Date: 07/15/2000 Product Type: Balanced Scorecard Report Article Product Description: To ensure that your strategies are adapting to meet changing circumstances, you need to integrate management control with strategic learning. Two feedback loops can help you accomplish this. In the first, the Balanced Scorecard becomes the agenda for the monthly management meeting -- and the emphasis here is on strategic performance companywide. The second loop involves periodic reviews that ascertain whether the implemented strategy is working as planned. HBS Number: B0007A Subjects: Balanced scorecard; Corporate strategy; Implementation; Learning; Performance measurement; Strategy formulation Academic Discipline: Accounting & control    Dynamics of Controlling Strategy   Add   View  25 pp.  Article Author(s): Simons, Robert Publication Date: 11/09/1994 Product Type: HBS Press Chapter HBS Number: 2417BC Subjects: Accounting procedures; Control systems; Corporate culture; Organizational learning; Risk management; Strategy implementation; Values; Vision Academic Discipline: Accounting & control Product Description: Control of business strategy is achieved by integrating the four levers of control. This chapter presents an integrated framework, illustrating that the power of the control levers lies in how they complement each other when used together. May be used with: (2419BC) Appendix B: Use and Misuse of Information Technology: Levers of Control Revisited; (2418BC) Appendix A: Checklist Summary of the Levers of Control; (2416BC) The Control Levers in Action: Controlling Business Strategy; (2415BC) Interactive Control Systems: Adapting to Competitive Environments; (2414BC) Diagnostic Control Systems: Implementing Intended Strategies; (2413BC) Beliefs and Boundaries: Framing the Strategic Domain; (2412BC) A Balancing Act: Tensions to Be Managed: Strategy, Organizations, and Control; (2411BC) Introduction: Strategy, Organizations, and Control.    Earnings Game: Everyone Plays, Nobody Wins   Add   View  12 pp.  Article Author(s): Collingwood, Harris Publication Date: 06/01/2001 Product Type: Harvard Business Review Article Product Description: Quarterly earnings numbers dominate the decisions of executives, analysts, investors, and auditors. Yet for all the attention paid to these numbers, they're not much use in predicting a company's future performance and cash flows. Even economists are unanimous in their view that these numbers say next to nothing about a company's prospects beyond the next quarter. Nonetheless, meeting analysts' expectations that earnings will rise in a smooth, steady, unbroken line has become, at many corporations, a game whose imperatives override even the imperative to deliver the highest possible return to shareholders. The fetishistic attention paid to this almost meaningless indicator might be cause for amusement, except for one thing: the earnings game does real harm. It distorts corporate decision making. It reduces securities analysis and investing to a guessing contest. It compromises the integrity of corporate audits. Ultimately, it undermines the capital markets. In this article, HBR senior editor Harris Collingwood takes an in-depth look at these effects, examining the intricacies of the earnings game and why companies believe they have no choice but to play it. Until more corporate executives change their practices, he explains, the earnings game will never lack for players. HBS Number: R0106C Subjects: Accounting; Corporate strategy; Earnings; Financial reporting; SEC; Securities analysis Academic Discipline: Accounting & control    Earnings Game: Everyone Plays, Nobody Wins (HBR OnPoint Enhanced Edition)   Add   View  16 pp.  Article Author(s): Collingwood, Harris Publication Date: 03/01/2002 Product Type: HBR OnPoint Article Product Description: This is an enhanced edition of the HBR reprint R0106C, originally published in June 2001. HBR OnPoint Articles save you time by enhancing an original Harvard Business Review article with an overview that draws out the main points and an annotated bibliography that points you to related resources. This enables you to scan, absorb, and share the management insights with others. Quarterly earnings numbers dominate the decisions of executives, analysts, investors, and auditors. Yet for all the attention paid to these numbers, they're not much use in predicting a company's future performance and cash flows. Nonetheless, meeting analysts' expectations that earnings will rise in a smooth, steady, unbroken line has become, at many corporations, a game whose imperatives override even the imperative to deliver the highest possible return to shareholders. The earnings game distorts corporate decision making. It reduces securities analysis and investing to a guessing contest. It compromises the integrity of corporate audits. Ultimately, it undermines the capital markets. In this article, HBR senior editor Harris Collingwood takes an in-depth look at these effects, examining the intricacies of the earnings game and why companies believe they have no choice but to play it. HBS Number: 9489 Subjects: Accounting; Corporate strategy; Earnings; Financial reporting; SEC; Securities analysis Academic Discipline: Accounting & control    Execution: The Missing Link in Retail Operations   Add   View  18 pp.  Article Author(s): Raman, Ananth; DeHoratius, Nicole; Ton, Ze Publication Date: 04/01/2001 Product Type: CMR Article Publisher: California Management Review Product Description: In spite of making substantial investments in information technology planning systems, retailers are struggling with two execution problems -- inventory record inaccuracy and misplaced stock keeping units (SKUs) -- that are hurting their performance and ability to satisfy customers. At one leading retailer, 65% of inventory records were inaccurate (i.e., recorded inventory levels did not reflect actual inventory levels). Misplaced SKUs at another leading retailer prevented one in six customers who requested help from a sales associate from finding the products that were available in a store. These execution problems reduce profits by more than 10%. Moreover, performance along these two dimensions of execution varies substantially among stores within the same chain that use identical information technology. By examining the systematic differences that exist among stores, this article identifies the drivers of inventory record inaccuracy and misplaced SKUs and recommends steps retailers can take to improve operational execution in their chains. HBS Number: CMR204 Subjects: Inventory control; Inventory management; Retail stores; Retailing industry Academic Discipline: Accounting & control    Expensing Options Solves Nothing   Add   View  8 pp.  Article Author(s): Sahlman, William A. Publication Date: 12/01/2002 Product Type: Harvard Business Review Article Product Description: The use of stock options for executive compensation has become a lightning rod for public anger, and it's easy to see why. Many top executives grew hugely rich on the back of the gains they made on their options — profits they've been able to keep even as the value they were supposed to create disappeared. The supposed scam works like this: Current accounting regulations let companies ignore the cost of option grants on their income statements, so they can award valuable option packages without affecting reported earnings. Not charging the cost of the grants supposedly leads to overstated earnings, which purportedly translate into unrealistically high share prices, permitting top executives to realize big gains when they exercise their options. If an accounting anomaly is the problem, then the solution seems obvious: Write off executive share options against the current year's revenues. The trouble is, Sahlman writes, expensing option grants won't give us a more accurate view of earnings, won't add any information not already included in the financial statements, and won't even lead to equal treatment of different forms of executive pay. Far worse, expensing evades the real issue, which is whether compensation (options and otherwise) does what it's supposed to do — namely, help a company recruit, retain, and provide the right people with appropriate performance incentives. Only ethical management, sensible governance, adequate internal control systems, and comprehensive disclosure will save the investor from disaster. HBS Number: R0212G Subjects: Accounting & control; Compensation; Corporate governance; Earnings; Ethics; Executive compensation; Financial statements; Incentives; Options Academic Discipline: Accounting & control    Expensing Stock Options: A Fair-Value Approach   Add   View  12 pp.  Article Author(s): Kaplan, Robert S.; Palepu, Krishna G. Publication Date: 12/01/2003 Product Type: Harvard Business Review Article Publisher: Harvard Business School Publishing HBS Number: R0312J Subjects: Accounting; Financial statements; Balance sheets; Compensation; Stock options Academic Discipline: Accounting & control Product Description: Now that companies such as General Electric and Citigroup have accepted the premise that employee stock options are an expense, the debate is shifting from whether to report options on income statements to how to report them. The authors present a new accounting mechanism that maintains the rationale underlying stock option expensing while addressing critics' concerns about measurement error and the lack of reconciliation to actual experience. A procedure they call fair-value expensing adjusts and eventually reconciles cost estimates made at grant date with subsequent changes in the value of the options, and it does so in a way that eliminates forecasting and measurement errors over time. The method captures the chief characteristic of stock option compensation — that employees receive part of their compensation in the form of a contingent claim on the value they are helping to produce. The mechanism involves creating entries on both the asset and equity sides of the balance sheet. On the asset side, companies create a prepaid-compensation account equal to the estimated cost of the options granted; on the owners'-equity side, they create a paid-in capital stock-option account for the same amount. The prepaid-compensation account is then expensed through the income statement, and the stock option account is adjusted on the balance sheet to reflect changes in the estimated fair value of the granted options. The amortization of prepaid compensation is added to the change in the option grant's value to provide the total reported expense of the options gra    Financial Management and Planning with the Product Life Cycle Concept   Add   View  8 pp.  Article Author(s): Rink, David R.; Roden, Dianne M.; Fox, Har Publication Date: 09/15/1999 Product Type: Business Horizons Article Publisher: Business Horizons/Indiana University Product Description: In an era of intensifying global competition and mercurial customer preferences, financial managers become increasingly involved in virtually all business functions, including marketing, R&D, and operations. One overarching framework that can guide financial analysis and decisions is the product life cycle (PLC) concept. The PLC leads to a set of prescriptive financial strategies for each stage of the product's sales cycle. Products in different stages — Pioneering, Introduction, Growth, Maturity, Decline — may be combined to form a diversified product portfolio, which can reduce risk. Mature products with strong steady cash flows can help balance the cash flow deficit of products in the pioneering stage, which lowers the risk of bankruptcy. A balanced portfolio also smoothes production and personnel needs. Cash resources need not come from the capital market, but from units that generate cash flows. The synthesized, expanded, and updated PLC model includes 126 financial strategies classified according to the five PLC stages. The prescriptive financial strategies evolve and change across a product's sales cycle. The PLC model also provides a system perspective for planning, as it organizes financial strategies according to intradepartmental, intracompany, and external financial relationships. Thus, the model clarifies finance's relationship with other functions of the firm in the decision-making process. HBS Number: BH037 Subjects: Financial analysis; Financial management; Financial planning; Product life cycle; Product lines; Product management; Product portfolio management; Resource allocation; Strategic planning Academic Discipline: Accounting & control    Fit Control Systems to Your Management Style   Add   View  10 pp.  Article Author(s): Cammann, Cortlandt; Nadler, David A. Publication Date: 01/01/1976 Product Type: Harvard Business Review Article Product Description: The use of organizational control systems may backfire easily on management. A system cannot control performance; it can only provide information to the manager and often the information is misleading. Two major approaches are usual for control strategies. The external control strategy stresses supervision and makes employee manipulation of results difficult. The internal motivation strategy develops participative goal setting and rewards overall job performance. When choosing either strategy, a manager should consider four issues: consistency between strategy and managerial style; organizational climate, structure, and reward system; reality of job performance measures; and individual differences among subordinates. HBS Number: 76103 Subjects: Control systems; Management styles; Organizational structure Academic Discipline: Accounting & control    Flaw of Averages   Add   View  4 pp.  Article Author(s): Savage, Sam Publication Date: 11/01/2002 Product Type: Harvard Business Review Article Product Description: Managers' desire to work with ``a number,'' to plug in an average figure, is legendary. But using an average to represent an uncertain quantity usually yields a wrong answer, compromising decisions in accounting, investment, sales, and other areas. Simple software can help. HBS Number: F0211B Subjects: Accounting; Accounting & control; Accounting procedures Academic Discipline: Accounting & control    Focused e-Tail Measurement and Resource Management   Add   View  8 pp.  Article Author(s): Zeller, Thomas L.; Kublank, David R. Publication Date: 01/15/2002 Product Type: Business Horizons Article Publisher: Business Horizons/Indiana University Product Description: Here is a framework, gleaned from a two-and-a-half-year study, for strategically measuring and evaluating the customer value proposition for anyone living in or entering the e-tail world. The first part provides a measurement structure to fence in the costs of going e-tail. The second identifies a reporting structure to focus succinctly on the financial outcome(s) of management's decisions. Examples are used to illustrate e-tail full product cost analysis and profit differential analysis. The numbers demonstrate that seemingly small changes in the revenue and direct cost per unit model can have a substantial impact on a product line's profitability. Activity-based costing (ABC) can play an essential strategic role in building and maintaining a successful e-tail business. Without an ABC measurement system, e-tailers will not be able to manage what they do not know. HBS Number: BH070 Subjects: Accounting; Electronic commerce; Financial analysis; Information systems Academic Discipline: Accounting & control    For the Last Time: Stock Options Are an Expense   Add   View  12 pp.  Article Author(s): Bodie, Zvi; Kaplan, Robert S.; Merton, Rob Publication Date: 03/01/2003 Product Type: Harvard Business Review Article Product Description: Should stock options be recorded as an expense on a company's income statement and balance sheet, or should they remain where they are, relegated to footnotes? The authors believe the case for expensing options is overwhelming. In this article, Nobel laureate Robert Merton, one of the inventors of the Black-Scholes option-pricing model; his co-author on the classic textbook Finance, Zvi Bodie; and Robert Kaplan, creator of the Balanced Scorecard, examine and dismiss the principal claims put forward by those who continue to oppose options expensing. They demonstrate that stock-option grants have real cash-flow implications that need to be reported and detail the distortions that relegating stock-option accounting to footnotes creates. The authors agree that options are a powerful incentive, and failing to record a transaction that creates such powerful effects is economically indefensible. Worse, it encourages companies to favor options over alternative incentive systems. HBS Number: R0303D Subjects: Accounting & control; Corporate governance; Earnings; Financial statements; Options Academic Discipline: Accounting & control    Getting Transfer Prices Right: What Bellcore Did   Add   View  8 pp.  Article Author(s): Kovac, Edward J.; Troy, Henry P. Publication Date: 09/01/1989 Product Type: Harvard Business Review Article Product Description: Bellcore's four service centers were charging unrealistically high prices internally. The transfer pricing system was at fault. Its four service centers were people intensive, and overhead costs were allocated on the basis of total head count. Rental rates were a companywide average and did not distinguish open space from labs or computer rooms, which are more expensive to maintain. By making some simple adjustments, Bellcore made the system more accurate, allocating overhead according to the proportion of technical and administrative professionals in a department and rental rates according to the kind of building space. HBS Number: 89507 Subjects: Cost accounting; Cost allocation; Pricing; Transfer pricing Academic Discipline: Accounting & control    Global Accounting Is Coming   Add   View  3 pp.  Article Author(s): Barker, Richard G. Publication Date: 04/01/2003 Product Type: Harvard Business Review Article Product Description: Accounting scandals have opened the door to international influence on U.S. financial reporting. Most important for U.S. companies, under emerging global standards, income statements will become a lot more revealing. HBS Number: F0304D Subjects: Accounting & control; Accounting policies; Accounting standards; Financial reporting Academic Discipline: Accounting & control    High-Performance Budgeting   Add   View  5 pp.  Article Author(s): Wardell, Charles Publication Date: 01/01/1999 Product Type: Harvard Management Update Article Product Description: No one looks forward to the budgeting process. It's most often viewed as an unproductive exercise that steals time from your real job. However, the budget can be a powerful instrument for helping with forecasting, planning, and employee involvement. To accomplish this, you must first reengineer the budgeting process. Then you have to rethink how you use the budget itself. The traditional budget and the budgeting process are not adequate for today's economy. Some key flaws are the inability to quantify significant metrics such as innovation and quality and the tendency to compartmentalize a company into small units, providing departments with no incentive to look at the big picture. HMU presents a new approach to budgeting by offering a 6-point checklist that shows how to turn your budgeting process, and the resulting budget, into powerful tools. Includes a sidebar on basic tips for effective budgeting. HBS Number: U9901A Subjects: Budgeting; Academic Discipline: Accounting & control    How Hewlett-Packard Gets Numbers It Can Trust   Add   View  8 pp.  Article Author(s): Berlant, Debbie; Browning, Reese; Foster, Publication Date: 01/01/1990 Product Type: Harvard Business Review Article Product Description: Five years ago, Hewlett-Packard's Roseville Networks Division cost accounting system was obsolete and didn't reflect the true cost of a product. Management decided to redesign the system around the things that truly drive costs. Some decisions to be made were: Which costs should be traced directly to products? What should the categories of indirect costs be? What are important activities within those categories? What drives the costs of those activities? The system was introduced in 1985 and has been revised ever since. The division has stopped tracking direct labor to products and is considering ways to make the system more sensitive to volume in manufacturing and procurement. HBS Number: 90104 Subjects: Control systems; Cost accounting; Cost systems Academic Discipline: Accounting & control    How Much Cash Does Your Company Need?   Add   View  12 pp.  Article Author(s): Passov, Richard Publication Date: 11/01/2003 Product Type: Harvard Business Review Article Product Description: In late 2001, the directors of Pfizer asked that very question. And with good reason. After its 2000 merger with rival Warner-Lambert, the New York-based pharmaceutical giant found itself sitting on a net cash position of $6 billion, which seemed extraordinarily conservative for a company whose products generated $30 billion in revenues. Most large companies with revenues that healthy would increase leverage, thereby unlocking tremendous value for shareholders. But knowledge-intensive companies like Pfizer, this author argues, are in a class apart. Because their largely intangible assets (like R&D) are highly volatile and cannot easily be valued, they are more vulnerable to financial distress than are firms with a preponderance of tangible assets. To insure against that risk, they need to maintain large positive cash balances. Only by investing in their intangible assets can knowledge-based companies hope to preserve the value of those assets. HBS Number: R0311J Subjects: Balance sheets; Cash flow; Financial accounting; Financial analysis; Financial management; Financial planning; Intangible assets Academic Discipline: Accounting & control    How the Human Resource Function Can Create Value and Drive Strategic Success   Add   View  4 pp.  Article Publication Date: 03/15/2000 Product Type: Balanced Scorecard Report Article Product Description: This article summarizes a recent presentation made by human asset expert and author David Ulrich, who teaches at the University of Michigan Business School. The role of the human resource professional must be redefined, Ulrich argues, to meet the competitive challenges organizations face. In particular, many HR departments are too inwardly focused; instead of concentrating on the volume of transactions they generate, they should see themselves as sources of value creation. A case example in the article examines how Sears turned around its financial performance by moving from an inward focus on work output to an external focus on customer value. HBS Number: B0003C Subjects: Balanced scorecard; Corporate control; Corporate governance; Corporate strategy; Human resources management; Learning; Management controls; Performance measurement; Strategy formulation; Strategy implementation Academic Discipline: Accounting & control    How the Quest for Efficiency Corroded the Market   Add   View  10 pp.  Article Author(s): Healy, Paul M.; Palepu, Krishna G. Publication Date: 07/01/2003 Product Type: Harvard Business Review Article HBS Number: R0307F Industry Setting: Auditing Subjects: Accounting & control; Auditing; Corporate governance; Pension funds; Stock options; Stockholders Academic Discipline: Accounting & control Product Description: Just a few years ago, the U.S. stock market was the envy of the world. Thanks to new technology, friendly regulation, and the innovativeness of the financial services industries, it was open to anyone, anywhere, anytime. Americans poured into the market by the millions, and the more they invested, the more liquid, accessible, and attractive the markets became. The world is much less jealous today. Belatedly, investors have come to recognize that the vaunted business models of the new economy were more effective at consuming capital than generating it. The recent stock market and corporate governance failures, the authors argue, are rooted in regulatory and market changes introduced 20 years ago. These were intended to reduce the cost of financial information and increase liquidity — enhancements that the regulators believed would improve both investor access to the market and efficiency in pricing. The goal of liquidity was achieved, but the changes also triggered a race for the bottom in the auditing profession, destroyed the economics of investment analysis, and discouraged professional investors from relying on their own rational judgment. In this article, the authors explore what went wrong and outline their ideas for radical reform. They propose putting the country's stock exchanges in charge of the audit process; creating a new Investors Union modeled on the highly successful Consumers Union; and introducing a graduated tax on trading in pension savings.    Insights From Preferability Letters   Add   View  12 pp.  Article Author(s): Wallace, Wanda A. Publication Date: 09/15/2006 Product Type: Business Horizons Article Publisher: Business Horizons/Indiana University HBS Number: BH210 Subjects: Accounting; Governance; Internal controls; Power; Preferences; SEC Academic Discipline: Accounting & control Product Description: Scholarly literature has discussed why entities make voluntary accounting changes, and practice grapples with which change might be appropriate and when. Regulators have set forth a requirement that public companies file preferability letters with the Securities and Exchange Commission indicating the auditor's support for the particular change. Descriptive profiling of these letters from 1992 through 2004 leads to prescriptions that address practice challenges and regulators' expectations. Broad policy questions involve whether such changes ought to be permitted and what independence considerations arise as managers, directors, auditors, and regulators discuss and sometimes disagree on the preferred accounting principles.    Interactive Control Systems: Adapting to Competitive Environments   Add   View  36 pp.  Article Author(s): Simons, Robert Publication Date: 11/09/1994 Product Type: HBS Press Chapter HBS Number: 2415BC Subjects: Accounting procedures; Competitive environment; Control systems; Corporate culture; Innovation; Organizational learning; Risk management; Strategic initiatives Academic Discipline: Accounting & control Product Description: Managing the tension between creative innovation and predictable goal achievement is the essence of management control. This chapter looks at how senior managers use interactive control systems to build internal pressure to encourage the emergence of new strategic initiatives. May be used with: (2419BC) Appendix B: Use and Misuse of Information Technology: Levers of Control Revisited; (2418BC) Appendix A: Checklist Summary of the Levers of Control; (2417BC) The Dynamics of Controlling Strategy; (2416BC) The Control Levers in Action: Controlling Business Strategy; (2414BC) Diagnostic Control Systems: Implementing Intended Strategies; (2413BC) Beliefs and Boundaries: Framing the Strategic Domain; (2412BC) A Balancing Act: Tensions to Be Managed: Strategy, Organizations, and Control; (2411BC) Introduction: Strategy, Organizations, and Control.    Introduction: Strategy, Organizations, and Control   Add   View  11 pp.  Article Author(s): Simons, Robert Publication Date: 11/09/1994 Product Type: HBS Press Chapter HBS Number: 2411BC Subjects: Accounting procedures; Control systems; Corporate culture; Organizational learning; Risk management; Strategy implementation; Values; Vision Academic Discipline: Accounting & control Product Description: Understanding how to control empowered organizations in highly competitive markets is important for both theorists and practicing managers. In this chapter, the author introduces a new, comprehensive theory for controlling business strategy, illustrating how managers gain control of strategy using four basic levers. May be used with: (2419BC) Appendix B: Use and Misuse of Information Technology: Levers of Control Revisited; (2418BC) Appendix A: Checklist Summary of the Levers of Control; (2417BC) The Dynamics of Controlling Strategy; (2416BC) The Control Levers in Action: Controlling Business Strategy; (2415BC) Interactive Control Systems: Adapting to Competitive Environments; (2414BC) Diagnostic Control Systems: Implementing Intended Strategies; (2413BC) Beliefs and Boundaries: Framing the Strategic Domain; (2412BC) A Balancing Act: Tensions to Be Managed: Strategy, Organizations, and Control.    Just the Facts (and Forecasts)   Add   View  4 pp.  Article Author(s): Levine, Carolyn B.; Ijiri, Yuji Publication Date: 06/01/2004 Product Type: Harvard Business Review Article Product Description: By definition, forecasted numbers in a financial statement involve educated guesses. But that's not always clear in the statement itself. To reduce legal liability for off-the-mark predictions, a proposed new model for financial statements clearly distinguishes hard numbers from forecasts. HBS Number: F0406D Subjects: Financial statements; Forecasting; Models Academic Discipline: Accounting & control    Learning Standards for the Balanced Scorecard Support Global Understanding   Add   View  3 pp.  Article Author(s): Norton, David P. Publication Date: 11/15/1999 Product Type: Balanced Scorecard Report Article Product Description: This article explains the rationale for the set of functional standards recently introduced by the Balanced Scorecard Collaborative. These standards outline the basic elements that should be included in any software product, compensation program, or consulting service purporting to provide a balanced scorecard approach. HBS Number: B9911F Subjects: Balanced scorecard; Standardization Academic Discipline: Accounting & control    Linking Strategy to Planning and Budgeting   Add   View  5 pp.  Article Author(s): Kaplan, Robert S.; Norton, David P. Publication Date: 05/15/2000 Product Type: Balanced Scorecard Report Article Product Description: How can traditional budgeting practices be made more responsive to a company's rapidly changing needs? Don't just focus on the operational budget -- pay attention to the strategy budget as well, because that's what finances the initiatives that facilitate company growth. And don't fall into the trap of thinking that initiatives are ends in themselves. Rather, initiatives are the means by which a company accomplishes its strategic objectives. HBS Number: B0005A Subjects: Balanced scorecard; Budgeting; Corporate strategy; Operations management; Performance measurement; Strategy formulation Academic Discipline: Accounting & control    Linking the Balanced Scorecard to Strategy   Add   View  29 pp.  Article Author(s): Kaplan, Robert S.; Norton, David P. Publication Date: 10/01/1996 Product Type: CMR Article Publisher: California Management Review Product Description: The Balanced Scorecard was developed to measure both current operating performance and the drivers of future performance. Many managers believe they are using a Balanced Scorecard when they supplement traditional financial measures with generic, non-financial measures about customers, processes, and employees. But the best Balanced Scorecards are more than ad hoc collections of financial and non-financial measures. The objectives and measures on a Balanced Scorecard should be derived from the business unit's strategy. A scorecard should contain outcome measures and the performance drivers of those outcomes, linked together in cause-and-effect relationships. HBS Number: CMR073 Subjects: Corporate strategy; Financial analysis; Performance measurement Academic Discipline: Accounting & control    Make Overhead Cuts that Last   Add   View  11 pp.  Article Author(s): Neuman, John L. Publication Date: 05/01/1975 Product Type: Harvard Business Review Article Product Description: Overhead value analysis identifies structural cuts that will reduce overhead costs by 15% to 30%. Overhead value analysis requires delegating to every manager in the company, plus a small, high-level task force, the responsibility to cut overhead costs. The target should be a 40% reduction in costs. This program may have the undesirable side effects of hurting employee morale and of terminating a disproportionate share of minority employees. A company should apply the program when it has an acute short-term need to improve profits, or badly needs to gain a competitive edge by improving its economic structure. HBS Number: 75310 Subjects: Cost accounting; Cost control; Employee morale; Layoffs Academic Discipline: Accounting & control    Making Pro Formas Perform   Add   View  8 pp.  Article Author(s): Bryan, Stephen; Lilien, Steven Publication Date: 10/01/2003 Product Type: Harvard Business Review Article Product Description: Regulators are trying to clear up the muddle created by earnings-report adjustments called ``pro formas'' that companies issue. Constraining such reporting, as the regulators seem bent on doing, isn't the solution. Firms should increase alternative reporting -- and fully account for their accounting. HBS Number: F0310D Subjects: Accounting; Accounting & control; Accounting policies; Accounting standards; Regulation Academic Discipline: Accounting & control    Making Real Options Really Work   Add   View  12 pp.  Article Author(s): van Putten, Alexander B.; Macmillan, Ian C. Publication Date: 12/01/2004 Product Type: Harvard Business Review Article Product Description: As a way to value growth opportunities, real options have had a difficult time catching on with managers. Many CFOs believe the method ensures the overvaluation of risky projects. This concern is legitimate, but abandoning real options as a valuation model isn't the solution. Companies that rely solely on discounted cash flow (DCF) analysis underestimate the value of their projects and may fail to invest enough in uncertain but highly promising opportunities. CFOs need not--and should not--choose one approach over the other. Far from being a replacement for DCF analysis, real options are an essential complement, and a project's total value should encompass both. DCF captures a base estimate of value; real options take into account the potential for big gains. This is not to say that there aren't problems with real options. As currently applied, they focus almost exclusively on the risks associated with revenues, ignoring the risks associated with a project's costs. It's also true that option valuations almost always ignore assets that an initial investment in a subsequently abandoned project will often leave the company. In this article, the authors present a simple formula for combining DCF and option valuations that addresses these two problems. Using an integrated approach, managers will, in the long run, select better projects than their more timid competitors while keeping risk under control. Thus, they will outperform their rivals in both the product and the capital markets. HBS Number: R0412K Subjects: Accounting & control; Financial analysis; Options; Risk management; Valuation Academic Discipline: Accounting & control    Managing for Shareholder Value — From Top to Bottom   Add   View  8 pp.  Article Author(s): Wenner, David L.; LeBer, Richard W. Publication Date: 11/01/1989 Product Type: Harvard Business Review Article Product Description: Shareholder value analysis (SVA) applies the concept of discounted cash flow analysis to a wide range of business decisions. It is a better decision-making guide than conventional accounting analyses because it takes into account effects on the balance sheet and the time value of money. It also reflects cash flows over time. When used to guide decisions throughout a company, it ensures that the whole organization is focused on creating shareholder value rather than growth for growth's sake or earnings per share. Companies that want to use SVA must build the skills and create the incentives to institutionalize it. A case study provides an example of the use of SVA. HBS Number: 89615 Subjects: Accounting procedures; Cash flow; Middle management; Stockholders Academic Discipline: Accounting & control    Measure Costs Right: Make the Right Decisions   Add   View  9 pp.  Article Author(s): Cooper, Robin; Kaplan, Robert S. Publication Date: 09/01/1988 Product Type: Harvard Business Review Article Product Description: Managers in companies selling multiple products are making strategic decisions about pricing and product mix with distorted cost information, detecting the problem only after their competitiveness and profitability have deteriorated. An alternative is activity-based costing. Virtually all of a company's activities exist to support the production and delivery of today's goods and services. Companies need not scrap their official cost systems to use activity-based methods. The two can exist simultaneously. HBS Number: 88503 Subjects: Activity based costing; Cost accounting; Cost analysis; Cost systems; Costs; Pricing Academic Discipline: Accounting & control    Measure Costs Right: Make the Right Decisions (HBR OnPoint Enhanced Edition)   Add   View  16 pp.  Article Author(s): Cooper, Robin; Kaplan, Robert S. Publication Date: 04/15/2000 Product Type: HBR OnPoint Article Product Description: HBR OnPoint Articles save you time by enhancing an original Harvard Business Review article with an overview that draws out the main points and an annotated bibliography that points you to related resources. This enables you to scan, absorb and share the management insights with others. Managers in companies selling multiple products are making strategic decisions about pricing and product mix with distorted cost information, detecting the problem only after their competitiveness and profitability have deteriorated. An alternative is activity-based costing. Virtually all of a company's activities exist to support the production and delivery of today's goods and services. Companies need not scrap their official cost systems to use activity-based methods. The two can exist simultaneously. HBS Number: 357X Subjects: Activity based costing; Cost accounting; Cost analysis; Cost systems; Costs; Pricing Academic Discipline: Accounting & control    Measuring Value Creation with the Balanced Scorecard: Value Engineering Inc.   Add   View  7 pp.  Article Author(s): Norton, David P. Publication Date: 05/15/2000 Product Type: Balanced Scorecard Report Article Product Description: In the first article, ``Measuring Value Creation with the Balanced Scorecard,'' David P. Norton explains why the sophistication and complexity of intangible assets make them incompatible with traditional management systems. But the strategy map architecture of a Balanced Scorecard helps managers describe the linkage between intangible assets -- the drivers of strategy -- and tangible results, which are the outcomes. In a companion piece, ``Value Engineering, Inc.,'' Norton profiles an engineering firm that adopted the Balanced Scorecard to help quantify morale and empowerment -- concepts that had previously been considered too squishy to have practical significance -- and thereby lend support to the corporate strategy of building value-added partnerships with customers. HBS Number: B0005D Subjects: Balanced scorecard; Corporate strategy; Intangible assets; Knowledge management; Strategy formulation Academic Discipline: Accounting & control    Mobil’s Growth and Productivity Yields Premium-Grade Profitability   Add   View  7 pp.  Article Author(s): Baker, Brian Publication Date: 11/15/1999 Product Type: Balanced Scorecard Report Article Product Description: In 1994, Mobil launched a strategy emphasizing growth, productivity, and the reorganization of the company into 18 business units, each with profit-and-loss accountability. The Balanced Scorecard was brought in to help integrate the various elements by translating the strategy into operational terms and then aligning the people and the functional units of the organization around the strategy. These efforts helped Mobil move from worst to first in its industry. An accompanying interview with Brian Baker, president of Mobil North American Marketing & Refining, provides insight into how Mobil has been able to maintain its industry leadership for four consecutive years. HBS Number: B9911B Subjects: Balanced scorecard; Petroleum; Productivity; Strategy implementation Academic Discipline: Accounting & control    New Thinking for a New Financial Order   Add   View  4 pp.  Article Author(s): Farrell, Diana Publication Date: 09/01/2008 Product Type: Harvard Business Review Article HBS Number: F0809A Subjects: Capital markets; Global business Academic Discipline: Accounting & control Product Description: World financial assets are growing faster than the world economy. Confronting that and other modern realities of global finance requires more than regulatory reform: It calls for deeper thinking about new private and public international players and markets.    One Cost System Isn’t Enough   Add   View  8 pp.  Article Author(s): Kaplan, Robert S. Publication Date: 01/01/1988 Product Type: Harvard Business Review Article Product Description: No one cost system gives managers all the information they need to promote operational efficiency and produce the highest quality product at the lowest cost. Cost systems must serve three functions -- inventory valuation, operational control, and product cost measurement. This system for operations management performs three functions: it reports information according to production cycles, differentiates between fixed and variable costs, and allocates costs only to cost centers directly related to production activities. A more subjective system is advised for measuring product costs, starting with interviews with supervisors and including transaction measures as well as traditional volume-related measures. HBS Number: 88106 Subjects: Cost accounting; Cost analysis; Cost control; Cost systems Academic Discipline: Accounting & control    Organizational Fitness: The Context for Successful Balanced Scorecard Programs   Add   View  5 pp.  Article Author(s): Beer, Michael Publication Date: 09/15/1999 Product Type: Balanced Scorecard Report Article Product Description: Coordination, commitment, and competence are the key organizational capabilities that make for the successful implementation of strategy. But unclear strategy, poor leadership styles, and poor coordination across functions or business units can undermine organizational capability, dooming even the best strategy to failure. In this article, Harvard Business School professor Michael Beer describes organizational fitness profiling, a process for identifying and eradicating these ``silent killers'' before it's too late. HBS Number: B9909B Subjects: Balanced scorecard; Strategy implementation Academic Discipline: Accounting & control    Outsourcing Opportunities for Small Businesses: A Quantitative Analysis   Add   View  8 pp.  Article Author(s): Baxendale, Sidney J. Publication Date: 01/15/2004 Product Type: Business Horizons Article Publisher: Business Horizons/Indiana University Product Description: Outsourcing has become a way for companies to change their cost structures overnight. Even fixed costs can become variable. Depending on the types of relevant costs, a firm must decide between outsourcing and "do it yourself." But how can a small business owner determine whether a cost is relevant? The frameworks suggested here offer examples of quantitative analysis using combinations of variable direct, labor, discretionary fixed, and committed fixed direct costs. Using learning curve analysis, demonstrated indifference, Monte Carlo simulation, and economic value added, accountants can evaluate such situations and help steer the firm toward the right decision. HBS Number: BH099 Subjects: Cost accounting; Cost analysis; Financial analysis; Managerial economics; Outsourcing; Quantitative analysis; Small business Academic Discipline: Accounting & control    Performance Measurement Manifesto   Add   View  8 pp.  Article Author(s): Eccles, Robert G. Publication Date: 01/01/1991 Product Type: Harvard Business Review Article Product Description: More and more managers today are changing their company's performance measurement systems to track nonfinancial metrics like quality, customer satisfaction, innovation, and market share. They believe these measures reflect a company's economic condition and growth prospects better than its reported earnings do. New technologies and more sophisticated databases have made the change to nonfinancial performance measurement systems possible and economically feasible. HBS Number: 91103 Subjects: Control systems; Performance measurement Academic Discipline: Accounting & control    Point of View: Expensing Employee Stock Options Is Improper Accounting   Add   View  22 pp.  Article Author(s): Hagopian, Kip Publication Date: 08/01/2006 Product Type: CMR Article Publisher: California Management Review HBS Number: CMR348 Industry Setting: Accounting industry Subjects: Accounting policies; Accounting standards; Business government relations; Compensation; Financial accounting; Financial reporting; Stock options Academic Discipline: Accounting & control Product Description: In December 2004, the Financial Accounting Standards Board (FASB) adopted a new standard of accounting for employee stock options (ESOs). This standard, entitled Statement of Financial Accounting Standards 123R, requires that ESOs be valued at the date of grant and expensed over the vesting period of the options. The signatories to this position paper strongly oppose this revision to GAAP because they believe that the expensing of ESOs is improper accounting that will result in the serious impairment of the financial statements of companies that are users of broad-based option plans. The case against expensing ESOs can be summed up in six simple statements: an ESO is a “gain-sharing instrument” in which shareholders agree to share their gains (stock appreciation), if any, with employees; a gain-sharing instrument, by its nature, has no accounting cost unless and until there is a gain to be shared; the cost of a gain-sharing instrument must be located on the books of the party that reaps the gain — in the case of an ESO the gain is reaped by shareholders and not by the enterprise; the cost of the ESO, therefore, is borne by the shareholders; this cost to shareholders (which, not coincidentally, exactly equals the employee's post-tax profit) is already properly accounted for under the treasury stock method of accounting (described in FAS 128, entitled “Earnings per Share”) as a transfer of value from shareholders to employee option holders; and neither the grant no    Policy Hubs: Linking Analytic and Operational Applications   Add   View  5 pp.  Article Author(s): Morris, Henry Publication Date: 07/15/2000 Product Type: Balanced Scorecard Report Article Product Description: Henry Morris, vice president of warehousing for International Data Corp., explains the importance of rules linking software that facilitates business transactions or operations to software that automates the monitoring, analysis, and planning activities for specific processes. Taken together, these rules constitute a policy hub. For maximum utility, a policy hub should address strategic analytic applications such as the Balanced Scorecard. HBS Number: B0007B Subjects: Balanced scorecard; Corporate strategy; Data bases; Decision making; Inventory control; Operations management; Strategy formulation Academic Discipline: Accounting & control    Profit Priorities from Activity-Based Costing   Add   View  8 pp.  Article Author(s): Cooper, Robin; Kaplan, Robert S. Publication Date: 05/01/1991 Product Type: Harvard Business Review Article Product Description: Activity-based cost management (ABC) can help managers find the places in their organizations where improvement is likely to have the greatest financial payoff. To best utilize ABC, managers must separate whatever expenses are required to produce individual products from those required to process batches, to maintain a product, or to keep a manufacturing facility up and running. HBS Number: 91305 Subjects: Accounting procedures; Activity based costing; Cost accounting; Cost analysis; Cost control Academic Discipline: Accounting & control    Profit Priorities from Activity-Based Costing (HBR OnPoint Enhanced Edition)   Add   View  16 pp.  Article Author(s): Cooper, Robin; Kaplan, Robert S. Publication Date: 04/15/2000 Product Type: HBR OnPoint Article Product Description: HBR OnPoint Articles save you time by enhancing an original Harvard Business Review article with an overview that draws out the main points and an annotated bibliography that points you to related resources. This enables you to scan, absorb and share the management insights with others. Activity-based cost management (ABC) can help managers find the places in their organizations where improvement is likely to have the greatest financial payoff. To best utilize ABC, managers must separate whatever expenses are required to produce individual products from those required to process batches, to maintain a product, or to keep a manufacturing facility up and running. HBS Number: 3588 Subjects: Accounting procedures; Activity based costing; Cost accounting; Cost analysis; Cost control Academic Discipline: Accounting & control    Promise — and Peril — of Integrated Cost Systems   Add   View  16 pp.  Article Author(s): Cooper, Robin; Kaplan, Robert S. Publication Date: 07/01/1998 Product Type: Harvard Business Review Article HBS Number: 98403 Geographic Setting: Industry Setting: Subjects: Accounting procedures; Activity based costing; Control systems; Cost accounting; Cost allocation; Cost analysis; Cost systems; Costs Academic Discipline: Accounting & control Product Description: While it is true that there is great promise in integrated cost systems, there is also great peril, according to Harvard Business School Professor Robert Kaplan and Claremont Graduate School Professor Robin Cooper. The authors explain that unless managers approach integration very thoughtfully — with extremely careful customization — they could end up with a system that performs neither function well and that drives decision making in the wrong direction altogether. Operational-control and ABC systems have fundamentally different purposes. Their requirements for accuracy, timeliness, and aggregation are so different that no single, fully integrated approach can be adequate for both purposes. If an integrated system used real-time cost data instead of standard rates in its ABC subsystem, for example, the result would be dangerously distorted messages about individual product profitability — and that's precisely the problem ABC systems were originally designed to address. Proper linkage and feedback between the two systems is possible, however. Through activity-based budgeting, the ABC system is linked directly to operations control: managers can determine the supply and practical capacity of resources in forthcoming periods. Linking operational control to ABC is also possible. The activity-based portion of an operational control system collects information that, while it mustn't be fed directly into the activity-based strategic cost system, can be extremely useful once it's been properly an    Putting the Balanced Scorecard to Work   Add   View  20 pp.  Article Author(s): Kaplan, Robert S.; Norton, David P. Publication Date: 09/01/1993 Product Type: Harvard Business Review Article HBS Number: 93505 Subjects: Accounting & control; Accounting procedures; Balanced scorecard; Change management; Financial analysis; Interviews; Performance measurement; Quality control; Strategy formulation; Strategy implementation Academic Discipline: Accounting & control Product Description: In an earlier, groundbreaking article, Balanced Scorecard — Measures That Drive Performance, Reprint #92105, the authors proposed a new measurement system that provided managers with a comprehensive framework to translate a company's strategic objectives into a coherent set of performance measures. Now the authors show how several companies are putting the balanced scorecard to work. Effective measurement, the authors point out, must be an integral part of the management process. Much more than a measurement exercise, the balanced scorecard is a management system that can motivate breakthrough improvements in such critical areas as product, process, customer, and market development. Several examples — Rockwater, Apple Computer, and Advanced Micro Devices — illustrate how the scorecard combines measurement and management in different companies. From the experiences of these companies and others, the authors have found that the balanced scorecard is most successful when it is used to drive the process of change.    Putting the Balanced Scorecard to Work (HBR OnPoint Enhanced Edition)   Added   View  24 pp.  Article Author(s): Kaplan, Robert S.; Norton, David P. Publication Date: 02/01/2000 Product Type: HBR OnPoint Article HBS Number: 4118 Subjects: Accounting & control; Accounting procedures; Balanced scorecard; Change management; Financial analysis; Interviews; Performance measurement; Quality control; Strategy formulation; Strategy implementation Academic Discipline: Accounting & control Product Description: In an earlier, groundbreaking article, Balanced Scorecard: Measures That Drive Performance, Reprint #92105, the authors proposed a new measurement system that provided managers with a comprehensive framework to translate a company's strategic objectives into a coherent set of performance measures. Now the authors show how several companies are putting the balanced scorecard to work. Effective measurement, the authors point out, must be an integral part of the management process. Much more than a measurement exercise, the balanced scorecard is a management system that can motivate breakthrough improvements in such critical areas as product, process, customer, and market development. Several examples — Rockwater, Apple Computer, and Advanced Micro Devices — illustrate how the scorecard combines measurement and management in different companies. From the experiences of these companies and others, the authors have found that the balanced scorecard is most successful when it is used to drive the process of change.    Real Problem with Pensions   Add   View  4 pp.  Article Author(s): Merton, Robert C. Publication Date: 12/01/2004 Product Type: Harvard Business Review Article Product Description: Nobel laureate Robert C. Merton explains that companies sometimes misvalue capital investment opportunities because they fail to adjust their cost-of-capital calculations to reflect pension risks. HBS Number: F0412H Subjects: Capital investments; Compensation; Pension funds; Risk management Academic Discipline: Accounting & control    Reining in Activist Funds   Add   View  3 pp.  Article Author(s): Woidtke, Tracie; Bierman, Leonard; Tuggle, Publication Date: 03/01/2003 Product Type: Harvard Business Review Article Product Description: Some public pension funds aggressively pursue their pro-labor or social-issue agendas by submitting proxy proposals on topics ranging from employment practices to environmental concerns. But research shows that the stock market reacts negatively to corporations that receive such proposals. HBS Number: F0303D Subjects: Environmental protection; Pension funds; Social issues; Stocks Academic Discipline: Accounting & control    Remaking the Public Corporation from Within   Add   View  14 pp.  Article Author(s): Stewart, G. Bennett, III Publication Date: 07/01/1990 Product Type: Harvard Business Review Article Product Description: An emerging synthesis of financial strategies, organizational structures, and operating philosophies is revitalizing the publicly held corporation by addressing deep-seated structural weaknesses. This synthesis reflects three insights: the power of entrepreneurial motivation, the impact of balance-sheet restructuring and strict financial discipline, and the benefits of decentralizing authority and ownership. HBS Number: 90410 Subjects: Control systems; Decentralization; Financial management; Financial strategy; Management philosophy; Motivation; Organizational structure; Restructuring Academic Discipline: Accounting & control    Seek Strategy the Right Way at the Right Time   Add   View  4 pp.  Article Author(s): Gavetti, Giovanni; Rivkin, Jan W. Publication Date: 01/01/2008 Product Type: Harvard Business Review Article HBS Number: F0801G Industry Setting: Internet & online services industries Subjects: Strategy analysis; Strategy formulation Academic Discipline: Accounting & control Product Description: Deliberate, emergent, and analogical approaches to finding the best strategy all have their advantages, depending on where an industry is in its life cycle. Be open to the best option at each juncture and wise enough to make the right call.    Sharpening the Intangibles Edge   Add   View  12 pp.  Article Author(s): Lev, Baruch Publication Date: 06/01/2004 Product Type: Harvard Business Review Article HBS Number: R0406H Subjects: Assets; Brand equity; Capital costs; Growth management; Intangible assets; Intellectual capital; Investments; Value of information Academic Discipline: Accounting & control Product Description: Intangible assets — patents and know-how, brands, a skilled workforce, strong customer relationships, software, unique processes and organizational designs, and the like — generate most of a company's growth and shareholder value. Yet, extensive research indicates that investors systematically misprice the shares of intangibles-intensive enterprises. Clearly, overpricing wastes capital. But underpricing raises the cost of capital, hamstringing executives in their efforts to take advantage of further growth opportunities. How do you break this vicious cycle? By generating better information about your investments in intangibles and by disclosing at least some of that data to the capital markets. Getting at that information is easier said than done, however. There are no markets generating visible prices for intellectual capital, brands, or human capital to assist investors in correctly valuing intangibles-intensive companies. And current accounting practices lump funds spent on intangibles with general expenses, so that investors and executives don't even know how much is being invested in them, let alone what a return on those investments might be. At the very least, companies should break out the amounts spent on intangibles and disclose them to the markets. More fundamentally, executives should start thinking of intangibles not as costs but as assets, so that they are recognized as investments whose returns are identified and monitored. The proposals laid down in this article are only a beginning, the author stresses. Corporations and accounting bodies should make systemat    Should Balanced Scorecards Be Required?   Add   View  4 pp.  Article Author(s): Norton, David P. Publication Date: 07/15/2000 Product Type: Balanced Scorecard Report Article Product Description: External constituencies base their assessment of a company's value on expectations about the quality of the company's future decisions -- and how those decisions affect such things as new product pipelines, recruitment channels, the quality of the management, and the quality of the strategy. The Balanced Scorecard provides a standard means of communicating such information to outside audiences, declares David P. Norton. It ``does for strategic management what income statements and balance sheets do for financial management.'' HBS Number: B0007E Subjects: Balanced scorecard; Communication; Corporate strategy; Financial reporting; Strategy formulation Academic Discipline: Accounting & control    Social Cost of Fraud and Bankruptcy   Add   View  8 pp.  Article Author(s): Bower, Joseph; Gilson, Stuart Publication Date: 12/01/2003 Product Type: Harvard Business Review Article Product Description: The new WorldCom (to be known as MCI) will come out of Chapter 11 as a formidable competitor. That's left some experts questioning U.S. bankruptcy laws. HBS Number: F0312D Subjects: Accounting & control; Bankruptcy; Fraud; Legal aspects of business Academic Discipline: Accounting & control    Solving the Puzzle of the Cash Flow Statement   Add   View  8 pp.  Article Author(s): Hertenstein, Julie H.; McKinnon, Sharon M Publication Date: 01/15/1997 Product Type: Business Horizons Article Publisher: Business Horizons/Indiana University Product Description: The cash flow statement provides a potential wealth of information about how a company uses its assets. Unfortunately, too many readers of financial reports gloss over this part of the document and head to the long-familiar income statement and balance sheet. They probably do this because of the comparative recency of the cash flow statement and because their business schooling did not expose them to it. Contrary to most readers' assumption, though, the cash flow statement does not require sophisticated analysis of ratios in order to appreciate its value. This article provides a straightforward sequence of steps for tapping into the trove of information that a cash flow statement offers: 1) scanning the big picture; 2) checking the power of the cash flow engine; 3) pinpointing the good news and the bad news; and 4) putting the puzzle together. A self-test is provided so that readers can assess their ability to follow these steps and thus use the cash flow statement to generate powerful information about a firm's financial operations. HBS Number: BH013 Subjects: Cash flow; Financial management; Financial strategy Academic Discipline: Accounting & control    Spinning Out a Star   Add   View  12 pp.  Article Author(s): Lord, Michael D.; Mandel, Stanley W.; Wage Publication Date: 06/01/2002 Product Type: Harvard Business Review Article HBS Number: R0206H Subjects: Business growth; Business plans; Corporate reorganization; Restructuring; Spinoffs; Strategic planning; Strategy implementation; Venture capital Academic Discipline: Accounting & control Product Description: Spinouts rarely take off; most, in fact, fall into one or more of four traps that doom them from the start. Some companies spin out ventures that are too close to the core of their businesses, in effect selling off their crown jewels. Sometimes, a parent company uses the spinout primarily to pawn off debt or expenses or to quickly raise external capital for itself. Other times, a company may try to spin out an area of its business that lacks one or more of the critical legs of a successful company — a coherent business model, say, or a solid financial base. And in many cases, parent companies can't bring themselves to sever their ownership ties and give up control of their spinouts. R.J. Reynolds, the tobacco giant, managed to avoid these traps when it successfully spun out a most unlikely venture — the pharmaceutical company Targacept. As the story illustrates, the problem with spinouts is similar to the problem of rich children. Their parents have the wherewithal to spoil them or shelter them or cling to them, but what they need is tough love and discipline — much the same discipline that characterizes successful start-ups. R.J. Reynolds recognized that it didn't know that much about the pharmaceutical business and couldn't merely try to spin out a small clone of itself. It had to treat the venture as if it were essentially starting from scratch, with a passionate entrepreneurial leader, a solid business plan, help from outside partners in the industry and, ultimately, substantial venture backing. That these lessons are les    Strategies for Staying Cost Competitive   Add   View  9 pp.  Article Author(s): Thompson, Arthur A., Jr. Publication Date: 01/01/1984 Product Type: Harvard Business Review Article Product Description: Raising prices to cover rising costs and defend profit margins is a strategy that ceases to work in a recession, for that is when other companies start lowering their prices to increase their competitiveness. To avoid this competitive pricing trap, a company needs a method for seeing the unique way in which inflation is affecting it. Such a method is the value chain, a diagram that shows the value added at each step in the market process, from the raw materials stage to the final prices paid by consumers, exposing shifting cost components. HBS Number: 84117 Subjects: Cost accounting; Cost analysis; Financial management; Inflation; Pricing Academic Discipline: Accounting & control    Take Command of Your Growth   Add   View  12 pp.  Article Author(s): Treacy, Michael; Sims, Jim Publication Date: 04/01/2004 Product Type: Harvard Business Review Article Product Description: Ask senior managers to pare costs by 10%, and they know just what to do. Ask them to boost growth by 10%, and they're stymied, assuming that growth is not really something they can influence. But managers can control their company's growth if they have better information about where their revenues are coming from. Rather than sort sales by geographic market, business unit, or product line, they should break them out in a way that reveals which part of their strategy is responsible for what part of their revenue. This article presents a tool -- the sources of revenue statement (SRS) -- that does just that. Through straightforward calculations using data taken from a company's balance sheet, along with estimations of customer churn and industry growth rates, the SRS enables managers to classify their revenue according to five sources of growth: continuing sales to established customers (base retention); sales won from the competition (share gain); sales that fell into their laps because the market was expanding (market position); sales from moves into adjacent markets; and sales from entirely new lines of business. Once sorted in this way, revenue can be viewed as the outgrowth of manageable circumstances. Comparing the sources of revenue across divisions can uncover profound insights, which can suggest smart ways to change strategy or set stretch goals. HBS Number: R0404J Subjects: Accounting; Balance sheets; Growth management; Market analysis; Strategy formulation Academic Discipline: Accounting & control    Taking Account of Stock Options   Add   View  11 pp.  Article Author(s): Editors Publication Date: 01/01/1994 Product Type: Harvard Business Review Article Product Description: Since last June, the Financial Accounting Standards Board has been accepting comments on its proposal to require companies to recognize as expenses all stock-based awards, including stock options. The proposal has been on the FASB's agenda since 1984, long before executive compensation became a hot topic. The board will begin holding public hearings on the matter in the first quarter of 1994. The proposal has sparked a heated debate. Many investors argue that the new rules would give them a better understanding of a company's financial status. But many in management are opposed, especially entrepreneurs. Curtail the use of options by requiring fledgling enterprises to record them as expenses, and the number of successful start-ups will dwindle, many predict. In this issue's Perspectives section, seven experts consider the merits of the FASB's proposal. HBS Number: 94110 Subjects: Accounting policies; ESOP; Employee compensation; Financial reporting Academic Discipline: Accounting & control    Taking the Bias Out of Bean Counting   Add   View  4 pp.  Article Author(s): Bazerman, Max H.; Loewenstein, George Publication Date: 01/01/2001 Product Type: Harvard Business Review Article Product Description: Proposed changes by the SEC will reduce the accounting profession's conflicts of interest arising from consulting. But auditors can never be truly independent when they are hired and fired by the companies they audit. HBS Number: F0101D Subjects: Accounting policies; Auditing; Conflicts of interest; Consulting Academic Discipline: Accounting & control    Taking the Mystery Out of Investor Behavior   Add   View  12 pp.  Article Author(s): Coyne, Kevin P.; Witter, Jonathan W. Publication Date: 09/01/2002 Product Type: Harvard Business Review Article Product Description: Your company knows its investors pretty well, right? But do you know how they'll react to any particular strategic decision your company might make? Probably not. The consequences of not knowing can derail your strategy, leading you to miss out, for example, on acquisition opportunities. Authors Coyne and Witter claim that in most companies, the decisions of fewer than 100 investors typically account for about 70% of the changes in a company's share price. They also claim that a new approach to investor relations, drawing on the one used to manage customer relations, can help companies paint a more complete picture of their investors' behaviors and motivations. Investor-based finance first has you identify four groups of actual and potential key investors: large shareholders that suddenly become active, past shareholders that seem to be buying back in, smaller shareholders you think are poised to increase their holdings, and potential shareholders that own shares in comparable companies but not yours. By analyzing the patterns in the buying and selling behaviors of investors in those groups, you can ascertain which investors have the power to move your share price. Once you've determined who your key investors are, compare their horizon of analysis (long, medium, or short term) and the dominant content they analyze (information about organizational structure, strategy, or financials). In doing so, you'll come to understand what's most important to those investors, and you'll be able to predict how they'll likely react to different kinds of news and thus buy or sell shares in your company. HBS Number: R0209E Subjects: Acquisitions; Investments; Shareholder relations; Stockholders; Valuation Academic Discipline: Accounting & control

Tapping the Full Potential of ABC   Added   View  12 pp.  Article Author(s): Ness, Joseph A.; Cucuzza, Thomas G. Publication Date: 07/01/1995 Product Type: Harvard Business Review Article Product Description: Many companies have used activity-based costing in onetime profitability studies. But when companies integrate ABC into critical management systems and use it to make day-to-day decisions -- when they use it as activity-based management -- it becomes a powerful tool for continuously rethinking and improving a business. Most managers do not realize that implementing activity-based management is a major organizational-change effort that involves a tremendous amount of work. The biggest obstacle is resistance from employees. The authors focus on two companies -- Chrysler Corp. and Safety-Kleen Corp. -- whose success in implementing activity-based management can serve as a model for other companies. The benefits they have reaped have been 10 to 20 times their investments in their programs. HBS Number: 95408 Subjects: Activity based costing; Cost accounting; Cost systems Academic Discipline: Accounting & control    Time-Driven Activity-Based Costing   Added   View  12 pp.  Article Author(s): Kaplan, Robert S.; Anderson, Steven R. Publication Date: 11/01/2004 Product Type: Harvard Business Review Article HBS Number: R0411J Subjects: Accounting procedures; Activity based costing; Cost accounting; Cost analysis; Cost systems; Models Academic Discipline: Accounting & control Product Description: In the classroom, activity-based costing (ABC) looks like a great way to manage a company's limited resources. But executives who have tried to implement ABC in their organizations on any significant scale have often abandoned the attempt in the face of rising costs and employee irritation. They should try again, because a new approach sidesteps the difficulties associated with large-scale ABC implementation. In the revised model, managers estimate the resource demands imposed by each transaction, product, or customer, rather than rely on time-consuming and costly employee surveys. This method is simpler because it requires for each group of resources, estimates of only two parameters: how much it costs per time unit to supply resources to the business activities (the total overhead expenditure of a department divided by the total number of minutes of employee time available) and how much time it takes to carry out one unit of each kind of activity (as estimated or observed by the manager). This approach also overcomes a serious technical problem associated with employee surveys: when asked to estimate time spent on activities, employees invariably report percentages that add up to 100. Under the new system, managers take into account time that is idle or unused. Armed with the data, managers then construct time equations, a new feature that enables the model to reflect the complexity of real-world operations by showing how specific order, customer, and activity characteristics cause processing times to vary. This tool kit uses concrete examples to demonstrate how managers can obt    Tread Lightly Through These Accounting Minefields   Add   View  8 pp.  Article Author(s): Sherman, H. David; Young, S. David Publication Date: 07/01/2001 Product Type: Harvard Business Review Article Product Description: In the current economic climate, there is tremendous pressure -- and personal incentive for managers -- to report sales growth and meet investors' revenue expectations. As a result, more companies have issued misleading financial reports, according to the SEC, especially involving game playing around earnings. But it's shareholders who suffer from aggressive accounting strategies; they don't get a true sense of the financial health of the company, and when problems come to light, the shares they're holding can plummet in value. How can investors and their representatives on corporate boards spot trouble before it blows up in their faces? According to the authors, they should keep their eyes peeled for common abuses in six areas: revenue measurement and recognition, provisions and reserves for uncertain future costs, asset valuation, derivatives, related party transactions, and information used for benchmarking performance. This article examines the hazards of each accounting minefield, using examples like Metallgesellschaft, Xerox, MicroStrategy, and Lernout & Hauspie. It also provides a set of questions to ask to determine where a company's accounting practices might be overly aggressive. These questions are the first line of defense against creative accounting. The authors argue that members of corporate boards need to be financially literate. HBS Number: R0107K Subjects: Accounting; Accounting policies; Accounting procedures; Board of directors; Derivatives; Earnings; Ethics; Financial reporting; Fraud Academic Discipline: Accounting & control    Tread Lightly Through These Accounting Minefields (HBR OnPoint Enhanced Edition)   Add   View  16 pp.  Article Author(s): Sherman, H. David; Young, S. David Publication Date: 10/01/2002 Product Type: HBR OnPoint Article Product Description: This is an enhanced edition of HBR article R0107K, originally published in July 2001. HBR OnPoint articles include the full-text HBR article, plus a synopsis and annotated bibliography. In the current economic climate, there is tremendous pressure — and personal incentive for managers — to report sales growth and meet investors' revenue expectations. As a result, more companies have issued misleading financial reports, according to the SEC, especially involving game playing around earnings. But it's shareholders who suffer from aggressive accounting strategies; they don't get a true sense of the financial health of the company, and when problems come to light, the shares they're holding can plummet in value. How can investors and their representatives on corporate boards spot trouble before it blows up in their faces? According to the authors, they should keep their eyes peeled for common abuses in six areas: revenue measurement and recognition, provisions and reserves for uncertain future costs, asset valuation, derivatives, related party transactions, and information used for benchmarking performance. This article examines the hazards of each accounting minefield, using examples like Metallgesellschaft, Xerox, MicroStrategy, and Lernout & Hauspie. It also provides a set of questions to ask to determine where a company's accounting practices might be overly aggressive. These questions are the first line of defense against creative accounting. The authors argue that members of corporate boards need to be financially literate. HBS Number: 1997 Subjects: Accounting; Accounting policies; Accounting procedures; Board of directors; Derivatives; Earnings; Ethics; Financial reporting; Fraud Academic Discipline: Accounting & control    Turn Your Budgeting Process Upside Down   Add   View  4 pp.  Article Author(s): Howell, Robert A. Publication Date: 07/01/2004 Product Type: Harvard Business Review Article Product Description: Rather than highlight short-term accounting profits, budgets should emphasize future cash. That, as Warren Buffet knows, is where a company's growth potential lies. Changes as simple as replacing the word ``budgets'' and revising the format of budget reports can put you on a growth footing. HBS Number: F0407B Subjects: Budgeting; Cash flow; Growth management Academic Discipline: Accounting & control    Turnaround Management Every Day   Add   View  9 pp.  Article Author(s): Whitney, John O. Publication Date: 09/01/1987 Product Type: Harvard Business Review Article Product Description: Turnaround management is not just for troubled companies. Today's managers must earn the right to compete every day. The basics that will help them do that are the same ones that turnaround managers use to bring failing companies back to life. The rapidly changing environment can dump an otherwise untroubled company into new bankruptcy. Relying on summary reports from distant department heads to learn about the company's cash position can therefore be dangerous. It is better to scrutinize each line item in a cash projection and to use spreadsheet programs to design a number of possible scenarios. HBS Number: 87514 Subjects: Control systems; Management of change Academic Discipline: Accounting & control    United Parcel Service: The Balanced Scorecard Delivers the Goods   Add   View  5 pp.  Article Publication Date: 03/15/2000 Product Type: Balanced Scorecard Report Article Product Description: United Parcel Service was hardly on the skids when it adopted the Balanced Scorecard -- in fact, it had been one of the most admired companies in its industry for more than a decade. But at the same time, it wasn't exactly what you'd call a nimble, customer-focused enterprise. Implementing the scorecard changed all that; it helped UPS drive the vision and strategy up and down the entire organization. One company manager described the effect of the transformation this way: ``The service provider in front of the customer is now a salesperson, helping market the company and develop sales leads.'' As a result, UPS was named company of the year for 1999 by Forbes magazine. HBS Number: B0003B Subjects: Balanced scorecard; Communication; Corporate control; Corporate governance; Corporate strategy; Human resources management; Leadership; Learning; Management controls; Performance measurement; Strategy formulation; Strategy implementation Academic Discipline: Accounting & control    Use Strategy Maps to Communicate Your Strategy   Add   View  6 pp.  Article Author(s): Norton, David P. Publication Date: 11/15/1999 Product Type: Balanced Scorecard Report Article Product Description: The formulation of strategy will always be an art, but the description of strategy should not. Strategy maps provide a disciplined way of linking hypotheses about your company's performance to near-term objectives and activities. In this article author David P. Norton also describes how overarching strategies can be broken down into component themes, which then show up as measures in each of the BSC perspectives. HBS Number: B9911A Subjects: Balanced scorecard; Corporate strategy; Strategy implementation Academic Discipline: Accounting & control    Using Measurement to Boost Your Unit’s Performance   Add   View  6 pp.  Article Author(s): Case, John Publication Date: 10/01/1998 Product Type: Harvard Management Update Article Product Description: If you're like most managers, you're drowning in statistics. Financial numbers, operational data, and page after page of reports are piling up on your hard drive or desk. The information overload just gets worse as companies install enterprise resource planning (ERP) systems, which provide real-time data on an ever-greater number of variables. But data doesn't have to be the bane of your existence. In fact, it can be a tremendously powerful tool for measuring your unit. HMU offers five tips for sorting through the data and using it to improve performance. Includes two sidebars on performance measurement systems (``The Unbalanced Scorecard at Wainwright Industries'' and ``Tools for Tracking the Numbers''). HBS Number: U9810A Geographic Setting: Industry Setting: Subjects: Balanced scorecard; Business unit; Enterprise systems; ERP; Information management; Performance measurement Academic Discipline: Accounting & control    Using the Balanced Scorecard   Add   View  5 pp.  Article Author(s): Gendron, Marie Publication Date: 10/01/1997 Product Type: Harvard Management Update Article Product Description: As companies search for ways to articulate their long-term strategic goals and monitor progress toward these goals, they have increasingly turned to the balanced scorecard for help. The balanced scorecard helps to define the company's strategy in terms of specific, measurable goals in four areas: financial, customer, internal business, and innovation and learning. The company can monitor advancement toward these goals and make adjustments as needed. Robert S. Kaplan, co-author of The Balanced Scorecard: Translating Strategy into Action, believes that the balanced scorecard is particularly useful when companies gather what they have learned, and then ``reskill'' their employees to meet goals and become partners in the process. This article examines Analog Devices, Inc., once thought to be the originator of the balanced scorecard, and how the company has used the scorecard to continually improve its business. HBS Number: U9710C Geographic Setting: Industry Setting: Subjects: Accounting procedures; Balanced scorecard; Financial management; Goal setting Academic Discipline: Accounting & control    Using the Balanced Scorecard as a Strategic Management System   Add   View  16 pp.  Article Author(s): Kaplan, Robert S.; Norton, David P. Publication Date: 01/01/1996 Product Type: Harvard Business Review Article Product Description: As companies transform themselves to compete in the world of information, their ability to exploit intangible assets is becoming more decisive than their ability to manage physical assets. Several years ago, Robert S. Kaplan and David P. Norton introduced the balanced scorecard, which enabled companies to track financial results while monitoring progress in building the capabilities they would need for growth. Recently, some companies have gone further and discovered the scorecard's value as the cornerstone of a new strategic management system. Traditional management systems rely on financial measures, which bear little relation to progress in achieving long-term strategic objectives. The scorecard introduces four new processes that help companies connect long-term objectives with short-term actions. HBS Number: 96107 Subjects: Activity based costing; Balanced scorecard; Budgeting; Planning; Strategic planning; Strategy formulation; Strategy implementation Academic Discipline: Accounting & control    Using the Balanced Scorecard as a Strategic Management System (HBR Classic)   Add   View  20 pp.  Article Author(s): Kaplan, Robert Steven; Norton, David P. Publication Date: 07/01/2007 Product Type: Harvard Business Review Article HBS Number: R0707M Subjects: Activity-based costing; Balanced scorecard; Budgeting; HBR Classics; Planning; Strategic planning; Strategy formulation; Strategy implementation Academic Discipline: Accounting & control Product Description: The balanced scorecard revolutionized conventional thinking about performance metrics. When Robert Kaplan and David Norton first introduced the concept in 1992, companies were busy transforming themselves to compete in the world of information; their ability to exploit intangible assets was becoming more decisive than their ability to manage physical assets. The scorecard allowed companies to track financial results while monitoring progress in building the capabilities needed for growth. The tool was not intended to be a replacement for financial measures but rather a complement — and that's just how most companies treated it. Some companies went a step further, however, and discovered the scorecard's value as the cornerstone of a new strategic management system. In this article from 1996, the authors describe how the balanced scorecard can address a serious deficiency in traditional management systems: the inability to link a company's long-term strategy with its short-term financial goals. The scorecard lets managers introduce four new processes that help companies make that important link. The first process — translating the vision — helps managers build a consensus concerning a company's strategy and express it in terms that can guide action at the local level. The second — communicating and linking — calls for communicating a strategy at all levels of the organization and linking it with unit and individual goals. The third — business planning — enables companies to integrate their business plans wi    Using the Balanced Scorecard to Manage Value in Your Business   Add   View  6 pp.  Article Author(s): Contrada, Michael Publication Date: 01/15/2000 Product Type: Balanced Scorecard Report Article Product Description: What do we mean by value, and how do we measure it? Many tools are now available for measuring value in each of the four perspectives of a Balanced Scorecard. Among them: economic value added (EVA), customer value analysis, total quality management, and activity-based costing. In this article author Michael Contrada describes how a Balanced Scorecard can provide an organizing framework that helps companies maximize the benefits of these other tools. HBS Number: B0001C Subjects: Activity based costing; Balanced scorecard; EVA; Management controls; Strategy formulation; Total quality Academic Discipline: Accounting & control    Vital Truths About Managing Your Costs   Add   View  9 pp.  Article Author(s): Ames, B. Charles; Hlavacek, James D. Publication Date: 01/01/1990 Product Type: Harvard Business Review Article Product Description: Four truths apply to every business situation: 1) it is essential to be a lower-cost supplier; 2) to stay competitive, the inflation-adjusted cost of producing and supplying products and services must trend downward; 3) the true cost and profit pictures for each product/market segment must always be known; and 4) a business must concentrate as much on cash flow and balance sheet strengths as it does on profits. Various costs must be carefully isolated and assigned; expense categories such as R&D, sales, general, and administrative costs must not be ignored. Also gross margins should usually not be less than 40% and assets should not be over 60% of annual sales. HBS Number: 90102 Subjects: Cost accounting; Cost control; Financial management Academic Discipline: Accounting & control    What Kind of Management Control Do You Need?   Add   View  13 pp.  Article Author(s): Vancil, Richard F. Publication Date: 03/01/1973 Product Type: Harvard Business Review Article Product Description: Profit centers effectively analyze a segment of a company's business and motivate managers; however, they present implementation problems. Profit centers characteristically employ over-simplified accounting procedures. The most important criteria to use in selecting from the variety of financial measurements is company strategy and structure. The managers and their companies need a unified goal. Organizations of simple structure may use traditional cost centers, marketing profit centers, production profit centers, and multiple profit centers. It is the responsibility of the management controller to synthesize the characteristics of the business and choose the appropriate financial objective. HBS Number: 73213 Subjects: Control systems; Profit centers Academic Discipline: Accounting & control    What’s Your Real Cost of Capital?   Add   View  12 pp.  Article Author(s): McNulty, James J.; Yeh, Tony D.; Schulze, Publication Date: 10/01/2002 Product Type: Harvard Business Review Article HBS Number: R0210J Subjects: Acquisitions; Capital; Capital costs; Cash flow; Investments; Options; Stocks Academic Discipline: Accounting & control Product Description: In valuing any investment project or corporate acquisition, executives must decide what discount rate to use in their estimates of future cash flows. The traditional approach is to apply the capital asset pricing model (CAPM), which has remained fundamentally unchanged for 40 years. But the formula — in particular, its beta element — has long been a source of frustration. In fact, corporate executives and investment bankers routinely fudge their CAPM estimates, say the authors, because experience and intuition tell them the model produces inappropriate discount rates. CAPM has three main problems: First, beta is a measure of both a stock's correlation and its volatility; second, beta is based on historical data; and third, CAPM rates don't take into account the term of the investment. These factors together result in discount rates that defy common sense. As an alternative to CAPM and its beta element, the authors developed a forward-looking approach to calculating a company's cost of capital — the market-derived capital pricing model (MCPM). It does not incorporate any measure of historical stock-to-market correlation, relying instead on estimates of future volatility derived from the options market. This is helpful given that investor expectations from the options market are built into a company's current stock price. Using GE as an example, the authors give step-by-step instructions for how to calculate discount rates with MCPM. They also offer evidence from a range of industries to show that MCPM's discount rates are more realistic — especially from the corporate investor's pers    When a Scorecard Is Not a Scorecard   Add   View  4 pp.  Article Author(s): Norton, David P. Publication Date: 01/15/2000 Product Type: Balanced Scorecard Report Article Product Description: A Bain & Company survey recently found that 50% of North American companies claim to be using a Balanced Scorecard. In practice, it seems that there are really three different scorecards being used today: a constituent card, a key performance indicator card, and a strategy card. This article describes the salient features of each card and the conditions under which it works best. Author David P. Norton argues that only the strategy scorecard successfully tells the story of a company's strategy. HBS Number: B0001D Subjects: Balanced scorecard; Corporate strategy; Management controls; Performance measurement; Strategy formulation Academic Discipline: Accounting & control    When Is There Cash in Cash Flow?   Add   View  8 pp.  Article Author(s): Stancill, James McNeill Publication Date: 03/01/1987 Product Type: Harvard Business Review Article Product Description: No matter what their business, managers need to know how much cash they have to pay their obligations. Unfortunately, some of the cash flow measures they usually use to check their cash position -- including net income plus depreciation (NIPD) and earnings before interest and taxes (EBIT) -- only work when sales are steady. When sales skyrocket, the measures overestimate cash; when sales plummet, they underestimate cash. A new concept, net operating cash flow -- double prime, more clearly indicates the position of a company's cash bottom line. HBS Number: 87211 Subjects: Accounting procedures; Cash flow; Financial management Academic Discipline: Accounting & control    Who Needs Budgets?   Add   View  8 pp.  Article Author(s): Hope, Jeremy; Fraser, Robin Publication Date: 02/01/2003 Product Type: Harvard Business Review Article Product Description: Budgeting, as most corporations practice it, should be abolished. Most other building blocks are in place, but companies continue to restrict themselves by relying on inflexible budget processes and the command-and-control culture that budgeting entails. A number of companies have rejected the foregone conclusions embedded in budgets, and they've given up the self-interested wrangling over what the data indicate. In the absence of budgets, alternative goals and measures -- some financial, such as cost-to-income ratios, and some nonfinancial, such as time to market -- move to the foreground. Companies that have rejected budgets require employees to measure themselves against the performance of competitors and against internal peer groups. Because employees don't know whether they've succeeded until they can look back on the results of a given period, they must use every ounce of energy to ensure that they beat the competition. A key feature of many companies that have rejected budgets is the use of rolling forecasts, which are created every few months and typically cover five to eight quarters. Because the forecasts are regularly revised, they allow companies to adapt continuously to market conditions. The forecasting practices of two such companies, both based in Sweden, are examined in detail: the bank Svenska Handelsbanken and the wholesaler Ahlsell. HBS Number: R0302J Subjects: Accounting & control; Budgeting; Corporate culture; Decentralization; Forecasting; Performance measurement Academic Discipline: Accounting & control    Who Needs Budgets? (HBR OnPoint Enhanced Edition)   Add   View  16 pp.  Article Author(s): Hope, Jeremy; Fraser, Robin Publication Date: 02/01/2003 Product Type: HBR OnPoint Article HBS Number: 306X Subjects: Accounting & control; Budgeting; Corporate culture; Decentralization; Forecasting; Performance measurement Academic Discipline: Accounting & control Product Description: This is an enhanced edition of HBR article R0302J, originally published in February 2003. HBR OnPoint articles include the full-text HBR article, plus a synopsis and annotated bibliography. Budgeting, as most corporations practice it, should be abolished. That may sound radical, but doing so would further companies' long-running efforts to transform themselves into devolved networks that can nimbly adjust to market conditions. Most other building blocks are in place, but companies continue to restrict themselves by relying on inflexible budget processes and the command-and-control culture that budgeting entails. A number of companies have rejected the foregone conclusions embedded in budgets, and they've given up the self-interested wrangling over what the data indicate. In the absence of budgets, alternative goals and measures — some financial, such as cost-to-income ratios, and some nonfinancial, such as time to market — move to the foreground. Companies that have rejected budgets require employees to measure themselves against the performance of competitors and against internal peer groups. Because employees don't know whether they've succeeded until they can look back on the results of a given period, they must use every ounce of energy to ensure that they beat the competition. A key feature of many companies that have rejected budgets is the use of rolling forecasts, which are created every few months and typically cover five to eight quarters. Because the forecasts are regularly revised, they allow companies to adapt continuously to market conditions. The forecasting practices of two such c    Why Good Accountants Do Bad Audits   Add   View  6 pp.  Article Author(s): Bazerman, Max H.; Loewenstein, George; Moo Publication Date: 11/01/2002 Product Type: Harvard Business Review Article HBS Number: R0211G Subjects: Auditing; Conflicts of interest; Consulting firms; Corporate governance; Financial accounting; Financial reporting; Financial statements Academic Discipline: Accounting & control Product Description: On July 30, President Bush signed into law the Sarbanes-Oxley Act addressing corporate accountability. A response to recent financial scandals, the law tightened federal controls over the accounting industry and imposed tough new criminal penalties for fraud. The president proclaimed, “The era of low standards and false profits is over.” If only it were that easy. The authors don't think corruption is the main cause of bad audits. Rather, they claim, the problem is unconscious bias. Without knowing it, we all tend to discount facts that contradict the conclusions we want to reach, and we uncritically embrace evidence that supports our positions. The corporate-auditing arena is particularly fertile ground for self-serving biases. Because of the often subjective nature of accounting and the close relationships between accounting firms and their corporate clients, even the most honest and meticulous of auditors can unintentionally massage the numbers in ways that mask a company's true financial status. Solving this problem will require far more aggressive action than the U.S. government has taken thus far. What's needed are practices and regulations that recognize the existence of bias and moderate its effects. True auditor independence will entail fundamental changes to the way the accounting industry operates, including full divestiture of consulting and tax services, rotation of auditing firms, and fixed-term contracts that prohibit client companies from firing their auditors. Less tangibly, auditors must come to appreciate the profound i    Why Good Accountants Do Bad Audits (HBR OnPoint Enhanced Edition)   Add   View  16 pp.  Article Author(s): Bazerman, Max H.; Loewenstein, George; Moo Publication Date: 11/01/2002 Product Type: HBR OnPoint Article HBS Number: 2217 Subjects: Auditing; Conflicts of interest; Consulting firms; Corporate governance; Financial accounting; Financial reporting; Financial statements Academic Discipline: Accounting & control Product Description: This is an enhanced edition of HBR article R0211G, originally published in November 2002. HBR OnPoint articles include the full-text HBR article, plus a synopsis and annotated bibliography. On July 30, President Bush signed into law the Sarbanes-Oxley Act addressing corporate accountability. A response to recent financial scandals, the law tightened federal controls over the accounting industry and imposed tough new criminal penalties for fraud. The president proclaimed, “The era of low standards and false profits is over.” If only it were that easy. The authors don't think corruption is the main cause of bad audits. Rather, they claim, the problem is unconscious bias. Without knowing it, we all tend to discount facts that contradict the conclusions we want to reach, and we uncritically embrace evidence that supports our positions. The corporate-auditing arena is particularly fertile ground for self-serving biases. Because of the often subjective nature of accounting and the close relationships between accounting firms and their corporate clients, even the most honest and meticulous of auditors can unintentionally massage the numbers in ways that mask a company's true financial status. Solving this problem will require far more aggressive action than the U.S. government has taken thus far. What's needed are practices and regulations that recognize the existence of bias and moderate its effects. True auditor independence will entail fundamental changes to the way the accounting industry operates, including full divestiture of consulting and tax services    Why SG&A Doesn’t Always Work   Add   View  6 pp.  Article Author(s): Dudick, Thomas S. Publication Date: 01/01/1987 Product Type: Harvard Business Review Article Product Description: In many companies, corporate accountants preparing financial statements face intense deadline pressure. Using standard methods of allocating selling, general, and administrative (SG&A) expenses is a quick and easy way for them to calculate nonmanufacturing costs for different product lines. But management pays a price when company accountants take this shortcut. To allocate SG&A costs properly, controllers need to compile all expense data to produce a precise breakdown of all expense categories for each product line. The next step is to incorporate this information into the annual financial plan, with the goals of making fair and reasonable cost allocations. HBS Number: 87106 Subjects: Cost accounting; Cost allocation; Resource allocation Academic Discipline: Accounting & control    Why We Should Account for Inflation   Add   View  15 pp.  Article Author(s): Flynn, Thomas D.. Publication Date: 09/01/1977 Product Type: Harvard Business Review Article Product Description: Although corporate executives show great dissatisfaction with the SEC's recent efforts to account for the effects of inflation on their companies, they are unenthusiastic about any of the several other methods of inflation accounting suggested by the Financial Accounting Standards Board and other bodies. The author examines some of the reasons for business's negative attitude and, through an analysis of current approaches to inflation accounting, shows why use of one of the methods would benefit business by clarifying the effects of inflation in the public mind. HBS Number: 77504 Subjects: Accounting policies; Cost accounting; Cost systems; Financial reporting; Inflation accounting; McKinsey Award Winners Academic Discipline: Accounting & control    Xerox Cost Center Imitates a Profit Center   Add   View  4 pp.  Article Author(s): Tucker, Frances Gaither; Zivan, Seymour M Publication Date: 05/01/1985 Product Type: Harvard Business Review Article Product Description: A cost center can take pride in the service it gives to the company, but it's difficult for managers to tell if the center is working at an efficient level. Xerox's answer is to use the yardstick applied in the profit center in the cost center. The Logistics and Distribution (L&D) cost center of the Business System Group has taken steps to emulate the behavior of the profit center. HBS Number: 85317 Subjects: Cost accounting; Logistics; Motivation; Operations management; Profit centers Academic Discipline: Accounting & control    Yesterday’s Accounting Undermines Production   Add   View  7 pp.  Article Author(s): Kaplan, Robert S. Publication Date: 07/01/1984 Product Type: Harvard Business Review Article Product Description: Outdated cost accounting and management control systems are an obstacle to the lasting success of new manufacturing technologies and procedures. They distort the realities of manufacturing performance and fail to give managers the information they need to optimize the benefits of computer-aided manufacturing processes. Measurement systems for today's manufacturing operations must include such nonfinancial indicators as quality, inventory, productivity, innovation, and the morale and skills of the work force. McKinsey Award Winner. HBS Number: 84406 Subjects: Accounting procedures; Control systems; Cost accounting; Manufacturing; McKinsey Award Winners; Technological change Academic Discipline: Accounting & control    You Need a New Cost System When ...   Add   View  8 pp.  Article Author(s): Cooper, Robin Publication Date: 01/01/1989 Product Type: Harvard Business Review Article Product Description: A company needs reliable information on product costs. But sometimes it's difficult to know if a cost system is failing to deliver. It's time to redesign a cost system when, for instance, manufacturing managers want to drop products that seem to earn the biggest profits. Chances are those items are more troublesome than the cost system reflects. Also, when departments develop their own cost systems, it probably means the old one is no longer working properly. Sometimes changes in a company's product market strategy or competitive environment can render a cost system obsolete. When margins are paper thin, companies need more accurate costs than ever. HBS Number: 89102 Subjects: Cost accounting; Cost systems Academic Discipline: Accounting & control

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