The fundamental concept behind strategic performance measurement systems is that an organization’s strategy can be represented by a set of performance measures. This basic concept of representing a complex idea (like strategy) with something more tangible (like a measure) goes back hundreds, even thousands of years. Plato’s Allegory of the Cave provides perhaps the first evidence of this concept. In the allegory, Plato describes a hypothetical scenario in which a group of prisoners is chained to a wall inside a cave, locked in a position facing away from the cave opening. Plato explains that the prisoners have been in this condition their entire lives so their knowledge of the outside world is limited to what they are able to perceive in their current state staring only at the cave wall. Plato then describes how sunlight from the outside casts shadows of anything that passes by the cave opening into the cave. These shadows appear on the wall that the prisoners are facing, and sounds from the outside echo off the shadowed wall. Plato explains that, to the prisoners, reality is not outside the cave but the shadows are reality. To them, sounds don’t come from the outside but rather from the shadows on the wall before them. Plato then goes on to discuss the status of a prisoner freed from this bondage and his initial reaction to exposure to a different reality. Plato says, “Will he not fancy that the shadows which he formerly saw are truer than the objects which are now shown to him?”
This allegory illustrates that reality can really only be indirectly perceived via imperfect representations of reality. That is what accounting is all about. Accounting measures are imperfect representations of economic ideas that cannot be seen directly—just like Plato’s shadows in the cave. Accounting measures are merely reflections of more interesting and important concepts.
Consider financial statements and answer the following: Why do people care about what is on a firm’s balance sheet or income statement? Are they really interested in the financial statements in and of themselves, or do they use the financial statements to learn something about the issues they really care about? What are some of those issues?
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Financial And Managerial Accounting
- Consider the following dialogue between a system professional, Jim Festin, and a manager of adepartment targeted for a new information system, Charles Puno:Festin: The way to go about the analysis is to first examine the old system, such as reviewing keydocuments and observing the workers perform their tasks. Then we can determine which aspects areworking well and which should be preserved.Puno: We have been through these types of projects before and what always ends up happening isthat we do not get the new system we are promised; we get a modified version of the old system.Festin: Well, I can assure you that will not happen this time. We just want a thorough understanding ofwhat is working well and what is not.Puno: I would feel much more comfortable if we first started with a list of our requirements. We shouldspend some time up-front determining exactly what we want the system to do for my department. Thenyou systems people can come in and determine what portions to salvage if you…arrow_forwardWhen evaluating a potential new information system using the systems development life cycle approach, which study describes the process in which the organization's current system is analyzed to determine whether a new system is needed or can be repair the existing system? a. Systems design and development. b. Systems evaluation and maintenance. c. System analysis. d. Systems research and feasibility.arrow_forwardDescribe the benefits and drawbacks of several of the new approaches to reward systems. Which ones do you feel would be most effective in work organizations?arrow_forward
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- In an effort to optimize decentralization, work towards accomplishing its mission, and achieve goal-congruence, an organization will strive to utilize a lot of planning in the design and implementation of their management system. Which of the following represents one of the four pillars of management control systems? O Performance measurement Production O Unit pricing O Irresponsibility centersarrow_forwardAn essay of the Role of Perfomance Management Techniques in improving Organizational Performancearrow_forwardCan you breifly explain the role of performance management techniques in improving organizational performance. Expalin how i can develop arguments and evaluation on this topic.arrow_forward
- a) Explain what an ethical dilemma is and provide an example of a situation where individuals were faced with an ethical dilemma in a real-world project. b) Provide an example of a project that has failed. Your example should include a summary of reasons why the project is considered to have failed, with specific reference to the project lifecycle and controls that could have been put in place at each phase of the project lifecycle, to minimise the likelihood of these failures occurring in the first place. c) A company manufactures a component which sells for £33. The variable cost associated with its manufacture is £17 per component. Fixed costs allocated total £128,000. Plot a graph to show the number of components the company needs to sell to break even (i.e. to cover the sum of the fixed and variable costs). d) Tuckman found that teams go through six key development phases. List the six phases of team development and provide a brief explanation of each.arrow_forwardAccording to Simon (1999) the most appropriate Lever of Control to address a lack of opportunity or fear of risk is? a. Interactive Control Systems. b. Belief Systems. C. Boundary Systems. d. Diagnostic Control Systems. e. Short- and Long-Term Incentive Systems.arrow_forwardA balanced scorecard is an integrated system of performance measures designed to support an organization’s strategy. The various measures in a balanced scorecard should be linked on a plausible cause-and-effect basis from the very lowest level up through the organization’s ultimate objectives. The balanced scorecard is essentially a theory about how specific actions taken by various people in the organization will further the organization’s objectives. The theory should be viewed as tentative and subject to change if the actions do not in fact result in improvements in the organization’s financial and other goals. If the theory changes, then the performance measures on the balanced scorecard should also change. The balanced scorecard is a dynamic measurement system that evolves as an organization learns more about what works and what doesn’t work and refines its strategy accordingly. Why do the measures used in a balanced scorecard differ from company to company? Why does the…arrow_forward
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