Management accounting performance evaluation: Plastic for All (PFA) Organizations case - Assignment Example

MANAGEMENT ACCOUNTING Due Management Accounting Performance Introduction Plastic for All (PFA) Organization’s case presents some of the issues that management specialists, accountants and scholars have pursued with the need to seek solutions. PFA, a manufacturing firm, has various issues that require strategic change to retain the market share, reputation and grow in profits. As the case is, there are notable issues the author has rightly presented that need radical and urgent redress, such as restructuring all the disciplines for it to remain competitive in the manufacturing industry. For instance, it has failed to capitalize and take advantage of the sophisticated technology to stay ahead of their competitors in the market. The firm seems to be experiencing serious problems with communications between various stakeholders. The managers, for instance, have neglected the woes, challenged the staff, and have not planned to address them in good time. This has resulted in industrial boycotts and go-slows. The morale of working seems to be low, resulting in low quality and quantity of outputs. Challenges facing PFA organization There are several challenges facing the firm. First, the style and nature of management is dictatorial and harsh. The atmosphere is unpleasant between workers and supervisor, as well as between managers and supervisors. For instance, in the absence of the supervisor, workers are said to do little or do nothing at all (Go slows). This implies that they display sheer pretence during working time, especially in the absenture of the supervisor. Internally, this could signify a deeper problem that relates to their motivation caused by management failure to plan and respond urgently to matters facing the junior, such as working conditions. In the case, the workers tensed when the factory manager and supervisor drew closer, which shows that the relationship between workers and management is unfriendly. The noise from the factory could be a window into two deeper problems. One could be using poor technology and tools. Second, there could constant quarrels and miscommunication between workers during the course of their work progress. The issue of organization culture is highly evidenced. Organization culture is defined as a set of shared beliefs, truths, assumptions and values that operate in organizations, define and shape the manner and modalities that are adopted in the organizations. Many scholars define culture as how people behave when no one is looking at them. It has failed at the PFA as most of the operations at the factory seem to stem from the existing organization culture. It is the building blocks of moist highly successful firms. The PFA will probably fail if it keeps on neglecting the relevance of culture. The issues that have risen at PFA because of irrelevant culture are as follows: First, there is no leadership that best first the current business field as seen by the lack of full concern by their corporate leaders. For instance, delegating work without investing their time and effort in meaningful work at the factory. Second, workers are at the wrong place at the wrong time, not taking work seriously. Third, workers and managers know exactly what needs to be done but rather unwilling to do or rather do it the wrong way. Fourth, the factory seems to have blurred working conditions and wrong tools for the wrong jobs. Lastly, there is underestimating how big an undertaking is in most of the operations, such as market research, production strategies and the financial planning and management. As noted by Collaghan and Comerford, culture is the solid cornerstone that builds the organization, and differentiates the champions from failures in the same industry (Dynamic foundations). Next, there is underproduction in the company. This has been due to poor planning, inadequate staff, and technical challenges as well as managerial incompetence. The method of production has not been clearly outlined in the production strategy and there no clear vision in the production department. There also exist a larger gap between the manufacturing staff and market demand for their products. Lack of harmony and solid coordination between marketing, research and development and the manufacturing departments is witnessed in the underproduction, implying that there is no market demand forecasting so that supply can match it. Further, logistics wing has failed the organization. This is due to late customer delivery, customer and distributor feedbacks and forecasts in the market information. In-time order delivery strategy lacks in the organization because the manager is too busy with political issues. Lack of concern and agency problems have impaired honest, hard work and sincerity in discharging of their duties. More specifically, there is the lack of proper compensation packages by management concerning performance and targets. This has driven workers to other means of economic survival, as evidenced by the logistics director’s involvement in local politics. Next, lack of consistency in their production plans has killed the morale of production officers at the firm. This may be reflected in the policies, procedures and objectives set out in their production charters. For instance, it noted that the number of shifts and overtime payments would reduce, while shift hours will increase to twelve hours with no compensation and rewards for workers at night shifts. Apparently, the move has no consideration of the social and economical needs of workers and may likely kill the morale and subsequently lower their output. The completion of projects assist workers celebrate their efforts and commitments, which lacks in the firm. This kills the motivation and efforts of workers, as they do not see results. This makes them unhappy about their tireless commitments Training and development programs are inadequate or completely lacking in the PFA. The shift supervisor reveals no training or development programs to his staff. The policies that pertain to these programs are neglected and not pursued seriously. In addition, from the supervisor’s attitude about being receptive to change and new ideas, he seems to be rigid and conservative. The supervisor contemplates thirty years as being imperative and thereby ‘all knowing’ in the production departments. With emergence of new and sophisticated technology, there are better and advanced methods, tools and techniques of production that will enhance quality of products, reduce costs and increase efficiencies. This has long-term benefits to cost saving and overall profit margins of the firm. Management seems to emphasize more on targets and forget about the results. For instance, the management still strongly emphasises on targets while the business firms are shifting to results and value that the organization creates in society. There is also strict monitoring, lacks of relevant intelligence (data and facts) about the management techniques and control of the budgets. For instance, the logistics director seems to have authorised the clerk to assist him with non-official duty at office hours. This reduces the output of the firm, wastes time and threatens the survival, profitability and the competiveness of the firm. The tremendous noise points to two issues. First, it could be that the firm has adopted irrelevant or old-fashioned production technology. It could be using technology that is inefficient and old-fashioned. Second, the relationship amongst workers is hostile and unfriendly. This depicts the type of culture that is uninnovative and rigid, strategy that emphasise on short-term goals and neglects the long-term goals of the firm and structure that does not fit in strategy chosen. The structural design of the office is directly in front of the factory. This threatens the peaceful working of the staff by driving fear and worries amongst junior staff and may impair the proper atmosphere of the factory. Lastly, the financing of office expenditures should be proportionate to amount of costs. The relevant financial policy about how to finance sundry expenses at PFA seems inefficient and ineffective. This creates conflicts between departmental managers and their supervisors. Working capital and strict but fair strategies should appropriately be tailored in, well communicated to all employees in good time and agreed upon by every manager for approval. This will enhance their working relationships and spur up their individual efforts and commitments. Recommendations on how to control PFA Having critically analysed Plastics for All (PFA) and its operations and outlined the issue above, the following recommendation are thereby submitted for management for review and adoption. Human resource management and personnel approach Motivational packages such as increase in salary, other non-material benefits and motivations in general. Reduction of staff turnover through adoption of relevant strategies, such as maintaining a flexible and highly qualified workforce all the time, right, timely and fair remunerations, awards of merits among other packages. This will retain skills, talents and experience gained that will be useful in accomplishing some tasks. Proper work force planning to avoid wastages, to match demand and supply and keep production levels constant. Training and development programs for both old and new staff should be continuous, with their primary objectives well communicated. It will improve among other things in the PFA-optimum utilization of human resources that will help employee achieve their goals of the firm, develop the staff and their skills. This boosts motivation and output for the firm. Adoption of a healthy work environment will build good employee relations, so that individual goals align with organization goals. Unnecessary conflicts of interest and insubordination of interests will be avoided to the success of PFA. The firm should also introduce the health and safety programs and packages so costs such health bills, obsolescence will be reduced greatly. Training and development on how to make policies valuable and meaningful at all time to stay ahead of their competitors in the industry. Besides, it will help develop leadership skills, motivation, loyalty, better attitudes and other aspects that a successful worker ought to display. Corporate affairs management orientations Adopt a relevant strategy that fits structure of the PFA, so that all planning is carried out in harmony and coordination of all departments (Johnson & Scholes; Hoque). This strategic move will greatly avoid a constant confusion and conflicts of interest in responsibilities and line of authority. Emphasises and incorporate a new and innovative hardworking culture that will see the joy and please in hardworking –communication languages, lifestyle and official logos (Merchant & Van der Steede). Articulate clear visions, missions and relevant polices that will spearhead development, profitability and survival in difficulty business times (Johnson & Scholes) Make decisions based on relevance and timely data carried out by research and development teams (Atrill & McLaney). This will avoid making decision based on window-dressing whereby management makes decisions based on hearsays and opinions while neglecting facts on ground. For instance, in marketing, the management ought to carry out a thorough market survey and make decisions accordingly. Adopt a relevant production technology in all their operations (Comerford & Collarghan). They note that management need to alter the bases for unit production to include other criteria other than time (shifts) in PFA. For instance, they should include groupings based on functions and processes purely based on employees’ skills, abilities and nature of work. Others include product (departmentalization); clients based around customer topologies; location based on territorial integrity of the firm or units. Adopt the relevant control measures such as policies that emphasize value-creation and sustainable competencies for the firm. The policies should be communicated to the staff in a simple and timely manner. Hire and train talented and ready-to-learn individual conversant with needed technologies. This should be in alignment with the firm’s strategies and visions. Outsource from quality firms the labor and be ready to collaborate and learn relevant skills in management, production and customer focus. Adopt relevant CRM databases so that constant customer tastes, preferences can be monitored and relevant decisions taken to satisfy their ever-changing demands (Drury). This will enhance their information system that will in turn enhance the speed and quality of decisions made by management. Furthermore, it will keep updating itself with the changing customer patterns, demographics, psychographics and periods to set in responsive strategies. Adopt just-in-time delivery of orders to their customers (Johnson & Scholes; Hoque). This will improve the firm’s reputation by boosting its customer service. It also keeps the reputation of the firm high, making the customers to be loyal. Studies note they propagate the marketing information to those who would be customers in the nearby future. In the end, it boosts the sales, increase the index of survival and profitability. Research, development and technology approaches Use modern scientific tools, technologies and techniques to carry out research on modern methods of production, customer service and other fields of study that might be relevant at a given time (Atrill & McLaney; Garrison, Noreen & Seal; Drury; Hopper, Northcott & Scapens). Fund collaborative research with market leaders to learn and improve their human capital management skills (Comerford and Collarghan, 209). This can be boosted by adopting strategic alliances and business collaborating with gurus in the same industry. The learning curve will eventually improve the scope and bank of human capital in the long run for the PFA. Marketing concepts Able to attract, retain and satisfy customers by producing quality products. Comerford and Collarghan (170) note that the strategy will ensure survival, profitability and growth of the organization in the long run. Adopt marketing philosophies in all the areas such as mode of communication, style of dress codes and relationship building between various stakeholders in the organization. Internet, social and telemarketing strategies should be adopted with an aim of capturing a wider customer base. In addition to the above measures, Comerford and Collaghn (209) have proposed a few means of management control measures: Enlisting the top management’s support that involve the appropriate and correct allocation of resources to the control effort and add legitimacy to the system. This promotes confidence and spurs up the implementers of policies and junior managers. Keep controls few and simple in number. The easier the control measures are easier to understand, the greater the support and chances of support from the employees. Have a clear communication line that will enhance positive outlooks, which in turn will avoid frustrations and resentments at work. It is also noted that management has to refrain from too many accounting ‘buzzwords’ as most of the employees may not understand their meaning. Such words as ‘profit’ may negatively run in the minds of employees and should be used sparingly. In conclusion, there should be proper decision-making policies based in clear strategic planning, adoption, implementation and control in all the functions of the organization. The management should, therefore, adopt the report and implement the above few changes with view of value creation for all the stakeholders of PFA Company. Work Cited Atrill, P., and McLaney, E. Management Accounting for Decision Makers 6th ed. FT Prentice Hall, 2009. Print. Comerford, R. A. and Collaghan, D. W. Strategic management: Text, tools and cases for Business policy. Kent publishing, Boston, 1985. Print. Drury, C. Management and Cost Accounting. 7th ed. Cengage Learning, 2008. Web. http://www.drury-online.com Garrison, R, Noreen, E. and Seal, W. Management Accounting 4th ed. McGraw-Hill, 2012. Print. Hopper, T., Northcott, D. and Scapens, R. Issues in Management Accounting 3rd ed. FT Prentice Hall, 2007. Print. Hoque, Z. Strategic Management Accounting 2nd Edition. Concepts, Processes and Issues. Pearson Education, Australia, 2006. Print. Horngren, C.T., Bhimani, A., Datar, S.M. and Foster, G. Management and Cost Accounting. 4th ed. FT Prentice Hall, 2008. Print. Johnson, G. and Scholes, K. Exploring Strategy .Text and cases, 9th ed. Prentice Hall, 2010. Print. Kaplan, R. S. and Atkinson, A. A. Advanced Management Accounting. (3rd ed.) Prentice Hall, 2008. Print. Merchant, K. and Van der Stede, W. Management Control Systems. Performance Measurement, Evaluation and Incentives 3rd Ed. Harlow, FT Prentice Hall, 2012. Print. Read More