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The Management Reporting System

The document discusses the management reporting system, which provides internal reports to management that are not mandated by regulation. It describes factors that influence management reporting systems, such as management principles, functions, and problem structure. The document also outlines different types of management decisions and how reporting should support planning, control, tactical, and operational decisions.

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3K views

The Management Reporting System

The document discusses the management reporting system, which provides internal reports to management that are not mandated by regulation. It describes factors that influence management reporting systems, such as management principles, functions, and problem structure. The document also outlines different types of management decisions and how reporting should support planning, control, tactical, and operational decisions.

Uploaded by

kim che
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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The Management

Reporting System
Alisa Mae Albay
Management Reporting

 It is often called discretionary reporting because it is not mandated, as is financial


reporting.
Effective Management is mandated by SOX legislation
 It is a critical element of internal control.
 It directs management’s attention to problems on a timely basis promotes effective
management and thus supports the organization’s business objectives.
Factors that Influence MRS

 Management Principles;
 Management Function, Level, And Decision Type;
 Problem Structure;
 Types Of Management Reports;
 Responsibility Accounting; And
 Behavioral Considerations.
1. MANAGEMENT PRINCIPLE

 It provide insight into management information needs


 The principles that most directly influence the MRS are
 Formalization Of Tasks,
 Responsibility And Authority,
 Span Of Control, And
 Management By Exception.
Formalization of Tasks

 This suggests that management should structure the firm around the tasks it performs
rather than around individuals with unique skills.
 The purpose of this is to avoid an organizational structure in which the organization’s
performance, stability, and continued existence depend on specific individuals.
 The organizational chart shows some typical job positions in a manufacturing firm.
The information system must focus on the task, not the
individual performing the task. Otherwise, information
requirements would need to be reassessed with the
appointment of each new individual to the position.

Implications for MRS


Responsibility and Authority

 The principle of responsibility refers to an individual’s obligation to achieve desired


results. And it is closely related to the principle of authority.
 If a manager delegates responsibility to a subordinate, he or she must also grant the
subordinate the authority to make decisions within the limits of that responsibility.
 In a business organization, managers delegate responsibility and authority downward
through the organizational hierarchy from superior to subordinates.
In designing a reporting structure, the analyst must
consider the manager’s position in the reporting channel.

Implications for MRS


Span of Control

 A manager’s span of control refers to the number of subordinates directly under his
or her control.
 A firm with a narrow span of control has fewer subordinates reporting directly to
managers.
 Organizational behavior research suggests that wider spans of control are preferable
because they allow more employee autonomy in decision making.
Managers with narrow spans of control require detailed
reports while managers with broad control responsibilities
operate most effectively with summarized information.

Implications for MRS


Management by Exception

 This suggests that managers should limit their attention to potential problem areas (that
is, exceptions) rather than being involved with every activity or decision.
 Managers thus maintain control without being overwhelmed by the details.
Management attention must be focused on these exceptions
and remove unnecessary details that may draw attention
away from the actual important facts.

Implications for MRS


2. MANAGEMENT FUNCTION, LEVEL, AND
DECISION TYPE

Function
Planning
Control
MANAGEMENT FUNCTION, LEVEL, AND
DECISION TYPE

 Planning can be long range or short range.


 Long-range planning usually encompasses a period of between 1 and 5 years, but
this varies among industries.
 Short-term planning involves the implementation of specific plans that are needed to
achieve the objectives of the long-range plan.
MANAGEMENT FUNCTION, LEVEL, AND
DECISION TYPE

 The control function ensures that the activities of the firm conform to the plan.
 This entails evaluating the operational process (or individual) against a
predetermined standard and, when necessary, taking corrective action.
 Effective control takes place in the present time frame and is triggered by feedback
information that advises the manager about the status of the operation being
controlled
Planning and Control

 Four categories:
 strategic planning,
 tactical planning,
 managerial control, and
 operational control.
Strategic Planning Decisions

 Top-level managers make strategic planning decisions, including:


1. Setting the goals and objectives of the firm.
2. Determining the scope of business activities, such as desired market share,
markets the firm wishes to enter or abandon, the addition of new product lines
and the termination of old ones, and merger and acquisition decisions.
3. Determining or modifying the organization’s structure.
4. Setting the management philosophy.
Strategic Planning Decisions

 Strategic planning decisions have the following characteristics:


 They have long-term time frames.
 They require highly summarized information.
 They tend to be nonrecurring.
 Strategic decisions are associated with a high degree of uncertainty.
 They are broad in scope and have a profound impact on the firm.
 Strategic decisions require external as well as internal sources of information.
Tactical Planning Decisions

 These are subordinate to strategic decisions and are made by middle


management.
 These decisions are shorter term, more specific, recurring, have more certain
outcomes, and have a lesser impact on the firm than strategic decisions.
Management Control Decisions

 Management control involves motivating managers in all functional areas to


use resources, including materials, personnel, and financial assets, as
productively as possible.
 Uncertainty surrounds management control decisions because it is difficult to
separate the manager’s performance from that of his or her operational unit.
Operational Control Decisions

 Operational control ensures that the firm operates in accordance with pre-established
criteria.
 These are narrower and more focused than tactical decisions because they are
concerned with the routine tasks of operations.
 Operational control decisions have three basic elements:
 setting standards,
 evaluating performance, and
 taking corrective action.
Standards

 Standards are pre-established levels of performance that managers believe are


attainable.
 Once established, these standards become the basis for evaluating
performance.
PERFORMANCE EVALUATION

 The decision maker compares the performance of the operation in question


against the standard.
 The difference between the two is the variance.
TAKING CORRECTIVE ACTION

 After comparing the performance to the standard, the manager takes action to remedy
any out-of-control condition.
 Management must apply extreme caution when taking corrective action because an
inappropriate response to performance measures may have undesirable results.
Problem Structure

 The structure of a problem reflects how well the decision maker understands the
problem. Structure has three elements.
1. Data—the values used to represent factors that are relevant to the problem.
2. Procedures—the sequence of steps or decision rules used in solving the problem.
3. Objectives—the results the decision maker desires to attain by solving the problem.
Problem Structure

 When all three elements are known with certainty, the problem is structured.
Payroll calculation is an example of a structured problem:
1. We can identify the data for this calculation with certainty (hours worked,
hourly rate, withholdings, tax rate, and so on):
2. Payroll procedures are known with certainty:
3. The objective of payroll is to discharge the firm’s financial obligation to its
employees.
Unstructured Problems

 Problems are unstructured when any of the three characteristics identified


previously are not known with certainty.
 In other words, an unstructured problem is one for which we have no precise
solution techniques.

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