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Question: Managers of most organizations continually plan for the future, and after the plan is implemented, managers assess whether they achieved their goals. What are the two functions that enable management to go through the process of continually planning and evaluating? Answer: The two important functions that enable management to continually plan for the future and assess implementation are called planning and control. PlanningThe process of establishing goals and communicating these goals to employees of the organization. is the process of establishing goals and communicating these goals to employees of the organization. The controlThe process of evaluating whether the organization’s plans were effectively implemented. function is the process of evaluating whether the organization’s plans were implemented effectively. PlanningQuestion: Continually planning for the future is an important quality of many successful organizations, such as Southwest Airlines (discussed in Note 1.11 "Business in Action 1.1"). How do organizations formalize their strategic plans? Answer: Organizations formalize their plans by creating a budgetA series of reports used to quantify an organization’s plan for the future., which is a series of reports used to quantify an organization’s plans for the future. For example, Ernst & Young, an international accounting firm, plans for the future by establishing a budget indicating the labor hours required to perform specific services for each client. The process of creating a budget for each client enables the firm to plan for future staffing needs and communicate these needs to employees of the company. Rather than simply hoping it all works out in the end, Ernst & Young projects the labor hours required in the future, hires accounting staff based on these projections, and schedules the staff required for each client. A budget can take a variety of forms. A budgeted income statement indicates a profit plan for the future. A capital budget shows the long-term investments planned for the future. A cash flow budget outlines cash inflows and outflows for the future. We provide more information about how budgets can be used for planning purposes in later chapters. Business in Action 1.1Plans for the Future Review the annual report or 10K for just about any company, and you are likely to find information regarding plans for the future. Here are some examples:
As these companies go through the process of making decisions about the future, developing plans based on their decisions, and controlling the implementation of their plans, managerial accounting information will play a key role in all phases of the process. Sources: Southwest Airlines, “Annual Report, 2010,” http://www.southwest.com; Sears Holdings Corporation, “10K Report, 2010,” http://www.searsholdings.com; Nordstrom, Inc., “10K Report, 2010,” http://www.nordstrom.com. ControlQuestion: Although planning for the future is important, plans are only effective if implemented properly. How do organizations assess the implementation of their plans? Answer: The control function evaluates whether an organization’s plans were implemented effectively and often leads to recommendations for the future. Many organizations compare actual results with the initial plan (or budget) to evaluate performance of employees, departments, or the entire organization. For example, assume Ernst & Young creates a budget indicating the labor hours needed to perform tax services for a particular client (this is the planning function). After the work is performed, actual labor hours used to complete the work are compared to budgeted labor hours. This analysis is then used to evaluate whether employees were able to complete the work within the budgeted time and often results in recommendations for the future. Recommendations might include the need for adding more labor hours to the budget or obtaining better support documents from the client. Planning and controlling operations are critical functions within most organizations. In today’s business environment, effective planning and control by managers can be the key to survival. Key Takeaway
Review Problem 1.2Assume you are preparing a personal budget of all income and expenses for next month.
Solution to Review Problem 1.2
What is the process of determining whether planned goals are being met?Controlling is the process of determining whether planned goals are being met. Decision-making is an integral part of the planning, directing, and controlling functions.
Which of the following is not a management function controlling decision making directing planning?Management is defined as the procedure of organising, directing, planning and controlling the efforts of organisational members and of managing organisational sources to accomplish particular goals. Therefore, co-operating is not a function of management. Hence, the correct answer is option (c).
Which functions of management involves overseeing day to day activities a planning b directing and motivating C controlling D decision making?B. Directing and motivating – involves overseeing the day to day activities, seeing to it that the organization is functioning smoothly and the members of the organization are mobilized to carry out plans.
What activities and responsibilities are associated with management's functions?The management process consists of four primary functions that managers must perform: planning, organizing, leading, and controlling. It is important to realize that the management process is not always linear.
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