Managerial Tools and Techniques for Decision Making

Managerial Tools and Techniques for Decision Making

Copyright: © 2018 |Pages: 12
DOI: 10.4018/978-1-5225-2255-3.ch188
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The main aim of this chapter is to explain what considered as managerial tools and techniques for decision making in the area of management accounting and how they developed and evolved over the time. This chapter is intended to help us document the innovation, evolution and the adoption of a variety of relatively new management accounting techniques and practices in organisations. The chapter also looks at primary tasks/services performed by managerial techniques and tools to capture a wider range of techniques/tools that contribute to the conduction of managerial tasks/services but may not be listed as managerial tools in the literature.
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Management Accounting Innovations

We may refer to relatively new managerial techniques (introduced over the past three decades) as ‘innovation’ in this chapter. Rogers (2003) defines innovation as an idea, practice, or object that is perceived as new by an individual or another unit of adoption. Further, he suggests that if the individual has no perceived knowledge about an idea and sees it as new, it is an innovation. Likewise, Damanpour and Gopalakrishnan (1998) define innovation as the adoption of an idea or behaviour new to the organisation. The common criterion in any definition of innovation is newness. According to Rogers (2003), newness in an innovation might be expressed not only in terms of new knowledge, but also in terms of the first persuasion, or decision to adopt. Wolfe (1994) explains the diffusion of innovation as a way the new ideas are accepted (or not) by those to whom they are relevant. Rogers (2003) extends this definition to consider diffusion as a process by which an innovation is communicated through certain channels among the members of a social system. In line with above definitions, we may refer to the process of the evolution and the adoption of relatively newer managerial techniques as ‘diffusion’ in this chapter.

Key Terms in this Chapter

Balanced Scorecard: An integrated strategic performance management framework that helps organisations translate strategic objectives into relevant performance measures, by linking nonfinancial measures with a financial perspective in four areas of performance concerned with: financials, internal process, customers and innovation & learning.

Strategic Management Accounting (SMA): A focus on the analysis of the external environment which mandates corrections and adjustments to the internal control systems structures and decision support systems that are vital for the survival of organisations. SMA has an orientation towards the organisation’s environment such as suppliers, customers, and its competitive position relative to both existing and potential competitors.

Life Cycle Costing: A costing method that tracks and accumulates the actual costs attributable to each product from its initial research and development to its final customer servicing and support in the marketplace.

Target Costing: A form of costing system in which the manufacturing of a product or the provision of a service is restricted within a predetermined total cost ceiling so that a competitive price is achieved.

Benchmarking: The search for industry best practice that will lead to superior performance. It emphasises an outward focus and seeks to improve performance by learning from the experience of effective organisations.

Activity-Based Management (ABM): Use of ABC concepts to facilitate the identification and reduction of non-value-added activities.

Activity-Based Costing (ABC): An approach to costing that focuses on activities as the fundamental cost objects. It uses the cost of these activities as the basis for assigning costs to other cost objects such as products, services, or customers.

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