Essay: Managerial Accounting For Organizational Performance

Background Material

Describe about the Managerial Accounting for Superior Organizational Performance.

The importance of performance measurement and management control has emerged due to controlling and measuring the roles played by the corporate managers in driving superior organizational performance. The implication of the system helps the organizations from various industries in measuring their approaches in comparison with the key success factors (Kaplan and Atkinson 2015). This report is fabricated with the primary intention of comparing and contrasting the performance of the companies by developing analytical knowledge about the approaches adopted by the management of and methods followed as part of the remuneration system of the chosen companies. Here, it is important to mention that the companies selected for performing the assessment and developing comparative overview are Woolworths Limited, Metcash, Coles Supermarkets, and Australian Agricultural Company. The chosen companies are operating in different industries with the only similarity is based on their trading on the Australian Stock Exchange (ASX) as the public company. Woolworths Limited is a public retailer; wherein Metcash is a marketer and distributor of groceries and other consumer goods. In case of Coles, it is a subsidiary of Wesfarmers and operating in the retail supermarket division. Lastly, Australian Agricultural Company is publicly traded organization performing in beef and agriculture industry.

According to Kaplan (2015), the fundamental application of accounting and performance measurement systems is recurrently advised by the various scholars and researcher from the accounting and finance division aiming to ensure the execution of right strategies. The intention behind such recommendation is steering the firm towards the long-term enhancement of its organizational performance. Based on the complex needs of the current business world, the contemporary accounting and performance measurement system comprise of the amalgamation of both financial and non-financial performance measures linked with the specific strategies adopted by the businesses (Simons 2013). Simons (2013) has pointed out some of the chief examples in this particular context, such as balanced scorecard (BSC) and multi-criteria key performance indicators (KPI), which can be accompanied as part of the contemporary system. Otley and Emmanuel (2013) has significantly identified one of the major facts that the organization of modern days is additionally burdened with offering value to its key stakeholders apart from critically emphasising on enhancing the shareholders worth. Hence, the precise scenario leads the firms from different industries to rely heavily on its ‘contemporary accounting and performance measurement (CAPM)’ system for tackling the risks generated from financial and non-financial factors associated with each task while accomplishing those successfully (Otley and Emmanuel 2013).

Comparison of Findings

From the application of various kinds of investigation carried out by different scholars like Simons (2013), Otley and Emmanuel (2013), Drury (2013), Melnyk et al. (2014), apparent degree of understanding can be revealed regarding the reasons driving the organizations adopting the proposed system. The application of these studies also helps to gain knowledge about the accounting theories associated with the process while their workability to measure and control organizational performance. One of the works developed by the accounting and financial professional indicated that the implementation of CAPM system provides imperative influences on behaviour and performance of an organizational individual, where the finding of some other works has come up with observing the effects of the particular system in the overall team performance (Arjaliès and Mundy 2013). According to Van Dooren, Bouckaert, and Halligan (2015), the suitable introduction of CAPM system allows the firm to sort out the optimum strategies for the enterprise with the capability of offering highest potential for achieving the predefined objectives of the firm. The study further added that the particular resolution is devised by the proposed system to the company through disseminating analytical information about financial and non-financial perspectives associated with the chosen operations.

The noteworthy presence of accounting and performance measurement system provides assistance in aligning approaches and procedures defined by the management through various useful activities like setting up goals for the team, evaluating the performance, and making constructive decisions (Van Dooren, Bouckaert, and Halligan 2015). The combination of the recognised approaches is precious for the management to develop and sustain a control over the various measures taken to deal with the identified market conditions. Alternatively, there are various arguments regarding the definition, applications, and implications of the overall system as reflected through a number of literature produced by some other scholars. Studies like Melnyk et al. (2014), Arjaliès and Mundy (2013), and Gond et al. (2012) divulged that the definition and implication of accounting and performance measurement system lack an agreed viewpoint. The scenario results in the creation of rising level of confusions and limiting the effects on the performance of business (DRURY 2013). For example, Gond et al. (2012) have dictated that implications and functioning of the entire system are based on assumptions regarding financial and non-financial performance measures, where the elementary application of the system is only limited in evaluating the workforce and organizational performance from motivational and informational perspectives. Another study developed by Melnyk et al. (2014) have unveiled the fact that proper performance of the accounting and performance measurement system depends widely on the availability of supporting infrastructure, which mostly varies from the simple method of gathering and analysing data. Often the implementation of a CAMP system requires employing sophisticated information thoroughly supported by either ‘business intelligence solutions’ or ‘enterprise resource planning (ERP)’ system (Melnyk et al. 2014).

Finally, with the help of the accounting theories and guidelines defined by the vital scholars and professionals contribute to obtaining the understanding that the active introduction of accounting and performance measurement system highly emphasise the need of proper investment on the associated infrastructure. Through maintaining a successful system, the firms can be able to gain information provision, capturing the operational data, designing measures regardless how the functions are performed.

Based on the suggestions provided by Zhu and Azar (2015), analysing the performance of the company principally indicates the assessment of financial performance in the identified market. On the other hand, remunerations system mainly prioritise the need of providing a range of monetary and non-monetary rewards to the employees to provide them the increasing opportunities for satisfying their needs and contributing more efficiently to the company (Gond et al. 2012).

Based on the assessment of Woolworths’ financial performance, the company has posted an after-tax loss of around $973 million, which can be ascertained from its half-yearly financial records obtained from the profit and loss statement for the year ending 2015 (AnnuAl RepoRt 2015 - Woolworths Limited 2015). Based on the investigation, the inevitable loss significantly occurs due to the failed venture of the retailer in its domestic improvement market. According to Kezner (2013), the identified financial result marks first failure for the retailing giant in the ASX after 23 years. In contrast, the remuneration report of Woolworths suggests that the remuneration committee has additionally embraced some components complying with the international best practices in the pay system with aim of forming best compensation practices for ensuring the development of a highly committed workforce (2015 Remuneration Report - Woolworths Holdings Limited 2016).

From the assessment of financial report related to Metcash for the year ending 2015, it can be dictated that the organization may not be able to achieve the growth in its earning until 2018 (Annual Report - Metcash Limited. 2015). The particular reason behind the scenario is primarily based on the reducing grocery prices in the course of defending the market share of the group. Based on the remuneration report of the company, the policies and initiatives taken by the committee are chiefly influenced by the different conditions associated with the grocery market. The remuneration system formulates the current policies by significantly embedding the diversity schemes for satisfying the main requirements of its diversified workforce (Metcash 2016 Annual Report 2016).

In case of Coles Supermarket, the company is significantly ahead of its competitor in different categories due to the operating downfall of Woolworths. The financial statements of the last eight years are reflecting a substantial increase in operating efficiencies of Coles from the multiple aspects like quality of fresh produce, pricing strategy, staffing, and value for money (Annual and industry reports - Coles 2016). Considering the remuneration system employed by Coles, a range of attractive benefits is provided to the employees in addition to their core packages in the form of short and long-term incentives, superannuation, and overall competitive package. Apart from that, the perquisites provided by the corporation like relocation or annual packages are the compelling package of remuneration system of Coles (2014 Annual Report - Reports 2016).

From the analysis of the financial report of Australian Agricultural Company for 2015, the operations of the business have been able to reflect several positive sides. The primary reason for the favourable results is based on developing ways to transform the traditional production process through vertically integrating into the beef business (Annual Reports - AACo - Australian Agricultural Company 2016). Due to such integration, the company has achieved an operating EBITDA of $11.5 million in the first quarter of its 2016 financial report compared to the loss in the prior corresponding period. From the application of the remuneration report developed by the company, AAC has undertaken a review of its executive compensation strategy for supervising the implications adequately responding to the changing needs of shareholders, business, and contemporary marketplace (AACO 2016 ANNUAL REPORT 2016). ‘The Staff and Remuneration Committee’ is developed by the firm in three distinctive divisions for designing guiding resolutions for several disputes faced by the relevant employees.

From the analysis involving the annual statements and remuneration reports of the selected companies, some of the key concepts are extracted from the operational performance and compensation system established by the business. It is observed that Coles Supermarket adopts most viable accounting and performance measurement system in the Australian background, which can be evidenced by the significantly escalating performance of the organization in the retail supermarket division. From the application of annual report, several key performances indicating results are determined including the hike in revenues, income, sale of food and liquor in 2015. With reference to the feedback provided by Kaplan (2015), the fairness of the performance measurement system adopted by the company reflects within the strategy employed by the corporation in its contemporary business proceedings. Some of the practical components of its current strategy are freshness of quality, opportunities to build luminous careers, simplicity in the business approaches, and transformation of services to created value and trust among the customers (Speklé and Verbeeten 2014).

Conclusion

The result of analysis done by four different companies listed as public limited companies in ASX, it must need to be stated that the foremost plausible approach is attained by the efforts put forwarded by the senior executives and management division of Coles Supermarket. Alternatively, Metcash Limited is the particular corporation amongst the other to come up with a standard approach as part of its remuneration system dedicated for the organizational employees. The remuneration committee of the company understands the need of devising suitable policies and initiatives by considering the various needs of its diversified workforce. Workplace diversity is a key factor facilitating the organization to manage assorted requirements of the market in the rise of globalisation and technologic advancement (Kerzner 2013). In case of Woolworths, the after-tax loss incurred by the company is solely accounted for the futile management decisions taken by the managers from the perspective of investment. The negative results observed from the financial statement of the company impose unfavourable outcomes to its operations resulting in affecting the performance measurement system. Based on the study, it is observed that productive upshot cannot be delivered by the performance measurement system of Woolworths regarding the accumulation of maximum returns to the shareholders (Zhu and Azar 2015). In case of Metcash, the performance of the company is satisfactory. However, the volatility of share prices in the market has significantly delayed the operational growth of the company by affecting the precise positioning strategy. Lastly, the operational strength of Australian Agricultural Company can be scrutinized by its comprehensive compensation scheme by prioritising the employees and key managerial personnel. The power of the overall remuneration system is decided by the stability of the settlements regardless of vicissitudes in the associated market. Therefore, the companies from the identified marketplace should need to embrace the best practices for the accounting and performance measurement system for bolstering the continuation of appropriate employment practices while managing to receive additional incentives from the chosen market.

References

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2015 Remuneration Report - Woolworths Holdings Limited. (2016). 2015 Remuneration Report - Woolworths Holdings Limited. [online] Available at: https://www.woolworthsholdings.co.za/investor/annual_reports/ar2015/whl_2015_remuneration_report.pdf [Accessed 14 Sep. 2016].

AACO 2016 ANNUAL REPORT. (2016). AACO 2016 ANNUAL REPORT. [online] Available at: https://www.aspecthuntley.com.au/asxdata/20160610/pdf/01748186.pdf [Accessed 14 Sep. 2016].

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