Financial Planning and Control

Topics: Strategic management, Management, Management accounting Pages: 20 (4330 words) Published: April 20, 2014

Table of Contents

Title page1
Table of Contents2
Strategic Management as it Relates to PMM3
Introduction to Performance Measurement and Management3
How Modern Performance Measurement Techniques Facilitate PMM4 Emerging Systems for Performance Measurement6
The Balanced Scorecard7
The Impact of Globalization and Cultural Differences on the Application of PMM9 Conclusion13

Strategic management accounting is a detailed form of management accounting that oversees all aspects of an organization. The strategic aspect describes how an organization is able to match its capabilities and internally generated information such as budgets, and capacity with external opportunities in order to accomplish the organizations overall objectives, improve competitive advantage while also increasing profitability. The most important developments of effective strategic management accounting involve planning and control. As such, performance measurement and management is a main requirement of the strategic management accounting control objective. While traditional management accounting frameworks relay on financial measures, strategic management accounting observes both financial and non-financial measures. In the following paper, both the financial and non-financial elements of performance measurement and management, hereby referred to as PMM, will be discussed including how modern performance measurement techniques facilitate PMM, as well as the impact of globalization and cultural differences on the application of PMM.

“It has been long recognized that performance measurement and management is critical for the effective and efficient management of any business. PMM facilitates effective control and correction by reporting the current level of performance, and comparing it with the desired level of performance. More importantly, the PMM system also communicates strategic intent and importance to the rest of organization in terms of what has been measured and, as importantly, by what has not been measured. PMM is more important than the mission statement: metrics enable the organization to convey the strategy to everyone else in terms they can understand, thus making the strategy concrete and meaningful”. (Melnyk, et al, 2013). Managers are unable to manage what they cannot measure, therefore performance measurement is a fundamental aspect that drives total quality management. Performance measurement involves the continuous process of collecting, analyzing and reporting data relating to an organization. As a tool, it allows firms to become more effective and operate with greater efficiency. The challenge for organizations often lies in how to support and align the firm’s business strategy with performance measures. By implementing performance measurement and management strategies, organizations are able to improve quality by measuring current performance against set objectives, allowing the organization to make adjustments along the way. Additionally, PMM increases transparency. Stakeholders who have a vested interest in the organization want information which allows them to make informed decisions. By sharing performance information, organizations are able to gain support, increase investments and strengthen corporate brand and reputation. Furthermore, PMM has the added benefit of satisfying policy makers that the organization is being held accountable by demonstrating its achievements. Performance measurement provides a picture of the overall organizations operational effectiveness. Once data is collected and organizational performance has been measured, performance management is then executed. While performance measurement and performance management are often times used interchangeably, “performance management is a broader term that includes not...

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