Study Of Organizations Behavior

Study Of Organizations Behavior Formal and informal framework of policies and rules , within which an organization arranges its lines of authority and communications , and allocates rights and duties. Organizational structure determines the manner and extent to which roles , power , and responsibilities are delegated, controlled, and coordinated, and how information flows between levels of management . This structure depends entirely on the organizations objectives and the strategy chosen to achieve them. In a centralized structure, the decision making power is concentrated in the top layer of the management. Structure is the pattern of relationships among positions in the organisation and among members of the organisation. Structure makes possible the application of the process of management and creates a framework of order and command through which the activities of the organisation can be planned, organised directed and controlled. .Culture in Organizations These are the informal values, norms and beliefs which control how individuals and groups in an organization interact internally and externally. This in turn shapes attitude and behavior and the quality of inter group relationships again to achieve organizational goals. Lateral Horizontal Top Vertical Bottom Values and Norms Culture in organization has two founding values: Terminal Value; is linked to desire goals e.g. excellence, quality, morality, stability, profitability. Instrumental Value; is linked to desire modes of behavior for the organization e.g. hard work, tradition, respect for authority, risk taking, honesty, standards of service, dress code. Norms; specific norms emerge as a result of shared experiences over time which became expectations for behavior. These result in rules for conduct e.g. courtesy, cleanliness, grooming, teamwork, information sharing, and cooperation. The Source of Values Norms Edward Scheins approach to culture claims that it can be understood at 3 levels. Basic Assumptions: unconsciously learned responses based upon perception. Values and Beliefs: consciously help concepts as a result of experiences. Visible Artifacts: physical evidence e.g. office design, layout and dress code. Cultural Dynamics A set of beliefs and assumptions held commonly throughout the organization, taken for granted in that organization, but discernible to the outside observer in the stories of organization history and explanation of events. Company Information The Hong Kong Shanghai Banking Corporation (HSBC) group is one of the worlds leading financial organizations. It was founded in 1865 in china. Since then the bank expanded rapidly with an emphasis up representation in China and also other parts of Asia, Europe and America. In the mid 1950s HSBC embarked on a strategy of pursuing profitable growth through acquisitions as well as organic development. After conducting my research into global business of HSBC bank, we have identified that London offers tremendous opportunities for HSBC which make businesses want to operate in those markets. HSBC Culture Operational Strategy: The Worlds Local bank HSBC differentiates itself from its competitors by its branding. The strong tag line the worlds local bank reflects the HSBC approach towards powerful branding. This brand image has been the result of many years of investment in the companys corporate image and culture that attracts and maintains satisfied customers and employees. HSBCs understanding and experience of multiple markets and local knowledge have contributed towards its brand success. HSBC has branches in 76 countries and the strategy used is Think Global, Act Local. Corporate Social Responsibility: HSBC like many other major companies from different industries believes in sharing its success by giving it back to the community. The application of corporate social responsibility is mandatory for all companies doing business. This being thought as a liability could also provide a company with the tools to promote its brand image with in communities. They are aware of the social responsibilities of economy management, community and environment. HSBC has undertaken activities such as environmental protection projects, successful and honest business practices, educational programs, undergraduate scholarships and funding local community projects. They also undertake volunteer charity and community work. Human Resource Management: HSBC employs over 284,000 people worldwide. They understand the benefits and competitive advantage of having a smart, loyal and well educated workforce. HSBC encourages workforce diversity in order to create the finest employee network and a corporate culture that celebrates differences, empathy and integrity. They employ the best qualified individuals, regardless of their nationality to manage top-level operations. However they employ local country staff to manage day to day and branch operations because they know they local business environment and this strategy also helps the foreign company be accepted by the local society. HSBC Principles Values The HSBC Group is committed to five Core Business Principles: Outstanding customer service Effective and efficient operations Strong capital and liquidity Conservative lending policy Strict expense discipline Employee Benefits Rewards In return for employees dedication and hard work, HSBC offer a very attractive and competitive benefits package with rapid rewards for the right people. While different roles come with different rewards, the following is a guide to the kind of package they offer: Performance-related bonus scheme Pension 25 days holiday Private medical insurance Life insurance Preferential rates on a range of HSBC products Season ticket loan Sports and social scheme Employee assistance programs Corporate discounts HSBC Structure Corporate Governance: HSBC is committed to high standards of corporate governance. HSBC Holdings has complied throughout with the applicable codes provided by the Combined Code on Corporate Governance issued by the Financial Reporting Council and the Code on Corporate Governance Practices in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. The Board of HSBC Holdings has adopted a code of conduct for transactions in HSBC Group securities by Directors that complies with The Model Code in the Listing Rules of the Financial Services Authority and with The Model Code for Securities Transactions by Directors of Listed Issuers (Hong Kong Model Code) set out in the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, save that The Stock Exchange of Hong Kong has granted certain waivers from strict compliance with the Hong Kong Model Code, primarily to take into account accepted practices in the UK, particularly in respect of employee share plans. Following a specific enquiry, each Director has confirmed he or she has complied with the code of conduct for transactions in HSBC Group securities throughout the period. Board Committees: The Board has appointed a number of committees. The following are the principal committees: Group Management Board Group Audit Committee Remuneration Committee Nomination Committee Corporate  Sustainability Committee HSBC structure is matrix structure, because they have teams of people from various sections of the business, these teams will be created for the purpose of a specific purpose of a specific project and will be led by a project manager, often the team is only exists for the duration of the project and matrix structure are usually deployed to develop new products and services. Relationship between Culture and Structure Organizational Culture : a group of mutually interacting people with negotiated , shared values , understandings ,norms , ideals , way of life and the way of looking at the world and their place in it .The way a structure or culture is designed or evolves over time affects the way people and groups behave within the organization. Structure and culture affect: Behaviour Motivation Performance Teamwork and cooperation Intergroup and Interdepartmental relationships Organizational culture is more of a larger picture, a more general term that refers to a large umbrella of smaller topics and issues within an organization. The structure refers to the infrastructure, and the various methods and practices within that infrastructure, that helps an organizational culture run with the efficiency and consistency that should be the hallmark of any healthy organizational structure, whether it is in a corporation, sports team, or any other set up that is large enough to create its own organizational culture. This makes the structure an integral part of any organizational culture, but also narrows out a very specific segment of the culture as its own responsibility. Organizational structure will deal primarily with the set up of the culture. How management works, which specific responsibilities supervisors have, how a complaint is passed through the ranks-these are all issues within the organizational culture that are directly tied to how an organizational structure works. The structure is not limited to those three examples, but it would certainly include all of them. TASK 2 Styles of Management Management is tasks, Management is a discipline. But management also people. Every achievement of management is the achievement of a manager. Every failure is a failure of a manager. People manage rather than forces or facts .The vision, dedication and integrity of managers determine whether there is a management or mismanagement Stewart, R, Management and organizational behaviour, Sixth Edition, Laurie J Mullins. Prentice Hall (2002) Management takes place within a structured organizational setting with prescribed roles. It is directed towards the achievement of aims and objectives through influencing the efforts of others. This role encouraged a lot of writers to study management aspects, where they came out with theories thats become the sprit of management thinking. Scientific Management: F. W. Taylor. Taylor formalized the principles of scientific management, 1909, he published the book for which he is best known, Principles of Scientific Management. In his own words he explained: The old fashioned dictator does not exist under Scientific Management. The man at the head of the business under Scientific Management is governed by rules and laws which have been developed through hundreds of experiments just as much as the workman is, and the standards developed are equitable. Management Leadership According to John P. Kotter in his book, A Force for Change: How Leadership Differs From Management (The Free Press, 1990), managers must know how to lead as well as manage. Without leading as well as managing, todays organizations face the threat of extinction. Management is the process of setting and achieving the goals of the organization through the functions of management: planning, organizing, directing (or leading), and controlling. A manager is hired by the organization and is given formal authority to direct the activity of others in fulfilling organization goals. Thus, leading is a major part of a managers job. Yet a manager must also plan, organize, and control. Generally speaking, leadership deals with the interpersonal aspects of a managers job, whereas planning, organizing, and controlling deal with the administrative aspects. Leadership deals with. Theory X (Authoritarian Management Style): The average person dislikes work and will avoid it if he or she can. Therefore most people must be forced with the threat of punishment to work towards organizational objectives. The average person prefers to be directed; to avoid responsibility; is relatively less ambitious, and wants security above all else. Theory X basically holds the belief that people do not like work and that some kind of direct pressure and control must be exerted to get them to work effectively. These people require a rigidly managed environment, usually requiring threats of disciplinary action as a primary source of motivation. It is also held that employees will only respond to monetary rewards as an incentive to perform above the level of that which is expected. From a management point of view, autocratic (Theory X) managers like to retain most of their authority. They make decisions on their own and inform the workers, assuming that they will carry out the instructions. Autocratic managers are often called authoritative for this reason; they act as authorities. This type of manager is highly tasked oriented, placing a great deal of concern towards getting the job done, with little concern for the workers attitudes towards the managers decision. This shows that autocratic managers lose ground in the work place, making way for leaders who share more authority and decision making with other members of the group. Theory Y (Participative Management Style): Effort in work is as natural as work and play. People will apply self-control and self-direction in the pursuit of organizational objectives, without external control or the threat of punishment. Commitment to objectives is a function of rewards associated with their achievement. People usually accept and often seek responsibility. The capacity to use a high degree of imagination, ingenuity and creativity in solving organizational problems is widely, not narrowly, distributed in the population. In industry the intellectual potential of the average person is only partly utilized. A more popular view of the relationship found in the work place between managers and workers, is explained in the concepts of Theory Y. This theory assumes that people are creative and eager to work. Workers tend to desire more responsibility than Theory X workers, and have strong desires to participate in the decision making process. Theory Y workers are comfortable in a working environment which allows creativity and the opportunity to become personally involved in organizational planning. Some assumptions about Theory Y workers are emphasized in one of the texts, namely that this type of worker is far more prevalent in the work place than are Theory X workers. For instance, it is pointed out that ingenuity, creativity, and imagination are increasingly present throughout the ranks of the working population. These people not only accept responsibility, but actively seek increased authority. According to another of the authors studied for this project, in which the participative (Theory Y) leadership style is discussed, a participative leader shares decisions with the group. Also mentioned, are subtypes to this type of leader, namely the Democratic leader who allows the members of the working group to vote on decisions, and the Consensual leader who encourages group discussions and decisions which reflect the consensus of the group. A Laissez-Fair Style: A laissez-fair style is where the manager observes that members of group are working well on their own. The manager consciously makes a decision to pass the focus of power to members, to allow them freedom of action to do as they think best. And not to interfere; but is readily available if help is needed, There is often confusion over this style of leadership behavior. The world genuine is emphasized because this is to be contrasted with the manager who could not care, who deliberately keeps away from the trouble of sports and does not want to get involved. The manager just lets members of the group get on with the work in hand. Members are left to face decision which rightly belongs with the manager. This is more a non-style of leadership or it could perhaps be labeled as abdication. Management Styles at HSBC: The qualities required in individuals by HSBC reflect a lot about their approach towards the management style. These quality individuals are: Responsive: Who always try to anticipate and act quickly to ensure we meet and exceed our customers ever-changing expectations. Respectful: Individuals who look for the value in everyone. Fair: Who reward our customers for the commitment they give to us. Progressive: Who are driven by the belief that we can shape a better future. Perceptive: Who look harder, in order to understand things more deeply, and this informs everything we do. The management empowers employees and builds a trust with the employees to deliver the brand promise effectively. Every department has efficient staff available to help the customers but for more specific needs and decision making, the branch managers play the role. Leadership Leadership is a dynamic relationship based on mutual influence and common purpose between leaders and collaborators in which both are moved to higher levels of motivation and moral development as they affect real, intended change. (Kevin Freiberg and Jackie Freiberg, NUTS! Southwest Airlines Crazy Recipe for Business and Personal Success, Bard Press, 1996, p. 298) Three important parts of this definition are the terms relationship, mutual, and collaborators. Relationship is the connection between people. Mutual means shared in common. Collaborators cooperate or work together. This definition of leadership says that the leader is influenced by the collaborators while they work together to achieve an important goal. Leadership is the ability to command acceptance by a group of people and thus, get them to do what the leader wants. The person providing this direction and commanding acceptance is called the leader. From this definition of leadership, it is obvious that the leader is the person whom others accept to show them the way. However, you probably are aware that a leader can be imposed on a group of people against their will. For example, a military coup can bring a leader to power. This leader was not voted for or accepted by his people. But he ascended the leadership seat by virtue of military might or military intrigues. Management is doing things right, leadership is doing the right things (Warren Bennis and Peter Drucker) Leadership Styles Types of Leadership Style: Four of the most basic leadership styles are: Autocratic Bureaucratic Laissez-faire Democratic Autocratic Leadership Autocratic leadership: is an extreme form of transactional leadership, where a leader exerts high levels of power over his or her employees or team members. People within the team are given few opportunities for making suggestions, even if these would be in the teams or organizations interest. Many people resent being treated like this. Because of this, autocratic leadership often leads to high levels of absenteeism and staff turnover. Also, the teams output does not benefit from the creativity and experience of all team members, so many of the benefits of teamwork are lost. For some routine and unskilled jobs, however, this style can remain effective, where the advantages of control outweigh the disadvantages. Bureaucratic Leadership : Bureaucratic leaders work by the book, ensuring that their staff follow procedures exactly. This is a very appropriate style for work involving serious safety risks (such as working with machinery, with toxic substances or at heights) or where large sums of money are involved (such as cash-handling).In other situations, the inflexibility and high levels of control exerted can demoralize staff, and can diminish the organizations ability to react to changing external circumstances. Democratic Leadership or Participative Leadership : Although a democratic leader will make the final decision, he or she invites other members of the team to contribute to the decision-making process. This not only increases job satisfaction by involving employees or team members in whats going on, but it also helps to develop peoples skills. Employees and team members feel in control of their own destiny, and so are motivated to work hard by more than just a financial reward. As participation takes time, this style can lead to things happening more slowly than an autocratic approach, but often the end result is better. It can be most suitable where team working is essential, and where quality is more important than speed to market or productivity. Laissez-Faire Leadership This French phrase means leave it be and is used to describe a leader who leaves his or her colleagues to get on with their work. It can be effective if the leader monitors what is being achieved and communicates this back to his or her team regularly. Most often, laissez-faire leadership works for teams in which the individuals are very experienced and skilled self-starters. Unfortunately, it can also refer to situations where managers are not exerting sufficient control. Leadership vs. Management A leader can be a manager, but a manager is not necessarily a leader. The leader of the work group may emerge informally as the choice of the group. If a manager is able to influence people to achieve the goals of the organization, without using his or her formal authority to do so, then the manager is demonstrating leadership. Motivation Definition: Motivation is the processes that account for an individuals intensity, direction, and persistence of effort toward attaining a goal. Abraham Maslows hierarchy of needs is the most well-known theory of motivation. He hypothesized that within every human being there exists a hierarchy of five needs: (See Exhibit 6-1). Physiological: Includes hunger, thirst, shelter, sex, and other bodily needs Safety: Includes security and protection from physical and emotional harm Social: Includes affection, belongingness, acceptance, and friendship Esteem: Includes internal esteem factors such as self-respect, autonomy, and achievement; and external esteem factors such as status, recognition, and attention. Maslows Hierarchy of Needs If Maslows theory is true, there are some very important  leadership implications to  enhance workplace motivation. There are  staff motivation opportunities  by motivating each employee through their style of management, compensation plans, role definition, and company activities. Application of Maslows Theory If Maslows theory is true, there are some very important  leadership implications to  enhance workplace motivation. There are  staff motivation opportunities  by motivating each employee through their style of management, compensation plans, role definition, and company activities. Safety Needs: Provide a working environment which is safe, relative job security, and freedom from threats. Social Needs:  Generate a feeling of acceptance, belonging, and community by reinforcing team dynamics. Relationship between Theories of Motivation All companies seek to motivate their employees for a very simple reason; a motivated employee is a high producer. In todays workplace, many complex and sophisticated plans have been put in place towards this end; some companies offer a variety of incentives to meet the different needs and expectations of the different personalities employed there. Motivation is an individual thing; in other words, the same things do not motivate all people. Abraham Maslow outlines a pyramid-shaped theory that is the basis for most motivation theories that followed. They will then design and implement an action plan to increase the motivational factors in their own organization. Some of their action steps are discussed. The lowest level of Maslows pyramid of needs relates to every humans survival needs or by physiological needs, which include hunger, thirst and shelter are at this level (Robbins, 2001). TASK 4 Team Work A small number of people with complemen-tary skills who are committed to a common purpose, common performance goals, and an approach for which they hold themselves mutually accountable. -G. Moorhead and R.W. Griffin When people listen carefully to each other, when they seek and take seriously each others opinions, when they make use of each others competencies and expertise, they are involved in teamwork. Situations like, a football team, a marriage, a project at work, or a math team, may come and go. It requires no special structure, only an opportunity for two or more people to engage collaboratively and cooperatively in undertaking some task. Teamwork in the workplace is something to be expected in our organizations today. Senior leadership teams, functional and intact teams, special project teams, play an important role to the success of any business. However, finding, creating, and maintaining effective a high performance team is much more difficult. No group of people is automatically entitled to teamwork just because they are smart, talented, and are working together. Teamwork in the workplace is subject to countless challenges as different personalities, talents and expertise, values, and working styles are merged together. Group Working A collection of individuals, the members accept a common task, become interdependent in their performance, and interact with one another to promote its accomplishment Harold H. Kelley and J.W. Thibaut Various Types of Groups Friendship groups Interest Groups Formal groups Informal Groups Small groups Large groups Primary groups Secondary groups Coalitions Membership groups Reference groups Command groups Task groups Good group work has great potential for the following reasons: à ¢Ã¢â€š ¬Ã‚ ¢ Individuals are encouraged to become active rather than passive learners by developing collaborative and co-operative skills, and lifelong learning skills. à ¢Ã¢â€š ¬Ã‚ ¢ It encourages the development of critical thinking skills. à ¢Ã¢â€š ¬Ã‚ ¢ It requires the establishment of an environment of support, trust and co-operative learning can be nurtured. à ¢Ã¢â€š ¬Ã‚ ¢ It promotes learning and achievement. à ¢Ã¢â€š ¬Ã‚ ¢ Students have the opportunity to learn from and to teach each other. à ¢Ã¢â€š ¬Ã‚ ¢ Deep rather than surface approaches to learning are encouraged. à ¢Ã¢â€š ¬Ã‚ ¢ It facilitates greater transfer of previous knowledge and learning. à ¢Ã¢â€š ¬Ã‚ ¢ It enhances social skills and interactions. à ¢Ã¢â€š ¬Ã‚ ¢ Learning outcomes are improved. à ¢Ã¢â€š ¬Ã‚ ¢ Large numbers of individuals can be catered for and work on the task simultaneously. à ¢Ã¢â€š ¬Ã‚ ¢ Interaction and co-operation on a micro scale is facilitated thus decreasing a sense of isolation felt by some. à ¢Ã¢â€š ¬Ã‚ ¢ Quiet individuals have an opportunity to speak and be heard in small groups thus overcoming the anonymity and passivity associated with large groups. à ¢Ã¢â€š ¬Ã‚ ¢ Individuals get the chance to work on large projects (larger in scope or complexity than individual tasks). à ¢Ã¢â€š ¬Ã‚ ¢ It can save time and requires a shared workload. à ¢Ã¢â€š ¬Ã‚ ¢ Alternative ideas and points of view can be generated. à ¢Ã¢â€š ¬Ã‚ ¢ Individuals develop and practice skills in: decision making, problem solving, values clarification, communication, critical thinking, negotiation, conflict resolution, and teamwork. Team Working at HSBC The whole is greater than the sum of the parts. This is a phrase that very much applies to HSBC. Although, as an organization HSBC a leader in the world of financial services. It is the power and reach of each of our local teams working together, which make HSBC such a successful and fast growing business. Recognizing the importance of local knowledge is a key message of HSBC advertising but it is not merely this. It is a value the HSBC live by. The employees work as a team to perform daily operations seamlessly.

Film Versus Theatre Presentations of William Shakespeares Much Ado Abo

Film Versus Theatre Presentations of William Shakespeare's Much Ado About Nothing Shakespeare's comedy Much Ado About Nothing is a witty play that is interpreted in many different ways for many different audiences. Branaugh's movie rendition, compared to the Shenandoah Shakespeare Company's play, have many separately emphasized points. If we look at elements such as use of space, costuming, and love relationships we find that Kenneth Branaugh emphasizes the separation of the military from the domestic which eventually heads down to the separation of men and women, while in the stage production, the director emphasizes the relationship and friendship between Claudio, Benedict, and Don Pedro. In Branaugh's movie version of Much Ado About Nothing there is much emphasis placed visually upon the military and the domestic atmosphere. From the beginning of Branaugh's interpretation the clear distinction between the two groups is visually portrayed. The movie begins with Emma Thompson, Beatrice, reading aloud to her friends and family in a relaxed laid back setting. The first domestic scenes lay out the tranquility of Leonato's home compared to the rough and public military scenes. The first military scene shows Don Pedro and his comrades riding up to Leonato's house. The scene is visually pleasing with the soldiers striding up to the house on horses with their arms raised in the air in slow motion. A strong sense of military valor is established through the soldier's actions, and the movie has already established a sense of military and domestic space, which the play did not capture. The Shenandoah Shakespeare Company's version of the play began very differently. There was no domestic or military atmosphere at all and the ... ...oin the domestic group, but Don Pedro and Don John are not as faded out. Don Pedro is present in the end, however, he is not a main part of the action. All of the characters were present most of the time either sitting on stage or standing which made the two groups seem not as separate as in Branaugh's movie. Branaugh and the company director both made many choices, which influenced their performances. I enjoyed the movie more the play because it was not only full of funny lines and puns, but the actors and the setting were amazing. They movie seemed to flow more for me and I enjoyed being able to see the characters in a serene setting without having to visualize it all. Shakespeare's play Much Ado About Nothing can be interpreted, acted, read, and visualized in different ways, but I thought that Kenneth Branaugh brought together an amazing cast and performance.

Activity Based Costing Essay

Activity based costing (ABC) is a relative new way to allocate costs to specific processes and services. This system assures that the costs are accurately distributed to the products or services that generated them. ABC illustrates costs more accurately, giving management insight to the cost associated with certain business activities. ABC extends the decision-making skills of management by expanding on traditional costing (job order costing/process order costing) techniques. However, since ABC’s introduction in the 1980’s, many corporations are not using ABC, despite gained managerial decision making capabilities. Even by the mid-1990s, ABC’s use has not spread throughout the accounting industry and its use is not obvious (Selto & Jasinski, 1996). The following article will discuss the pros and cons of the ABC method. ABC is an extension of traditional product costing techniques. These techniques are called job order costing and process order costing. A job order costing system arranges costs for each unit as it goes through a production process. A process cost system collects costs in work in progress account. The numbers of units worked are recorded for the accounting period. These systems alone do not accurately illustrate costs incurred. Instead, these two costing techniques generally lump costs into 3 main categories (cost centers). These three categories are direct materials, direct labor and overhead. Cost drivers are then assigned to represent the relationship between the cost and the process it is allocated to. ABC provides a better map of the costs of manufacturing products or distributing services. ABC uses a multitude of activity centers, which are the equivalent to the previously mentioned traditional cost centers. Each of these activity centers has its own cost driver and driver rate. ABC identifies many different costs to products by adjusting the cost driver and driver rates to specific activity centers. This process avoids across the board allocations of cost. For example, a product, which takes up .03% of space in the warehouse, would require .03% cost absorbed by product sales revenue. If the depreciation unit requires 5% cost to replace equipment at a latter date, 5% is the driver rate for that particular product. Unit, batch  and product level costs can be determined with ABC. The following steps can summarize the ABC process. The first step is to identify the activities that consume resources and allocate costs to those activities. For example, purchasing materials, record keeping, labor, materials, miles driven, machine hours and number of customers served are activities, which consume resources and needs costs to be assigned to them. The second step is to distinguish the cost drivers that are related to each activity. For example, if machine hours an activity used in the process, then the number of hours used in production of one unit would be the particular cost driver rate. The last step is to allocate costs to products by multiplying the cost driver rate by the number of cost driver units consumed by the process. There are many inherent strengths in the ABC model. The ABC model allows costs to be allocated to many different activity centers. Few corporations can focus on undifferentiated product lines and be successful. Having multiple product lines means the company has multiple cost drivers associated with each different product line. ABC is helpful in selecting which products are successful and which ones should be eliminated. Accurate cost information is key in determining the actual costs of frequent product changes. This cost is important because costs can be a good indicator of the justification or termination of varying product lines. Product lines have become more complex. Product lines of past were much simpler. For example, the Model T Ford came in one style and one color, black. Today, Ford cars have many different colors and styles. These different styles all have different cost drivers and activity centers. ABC illuminates hidden costs when high volume sales are not present and product differentiation is. This is advantageous because unprofitable lines can be replaced with lines that are profitable. Not many years ago, labor comprised 25 to 50 percent of a product’s cost. However, since the 1960s, labor is increasingly less involved in the  production process. For example, the textile industry replaced 100-year old shuttle looms for European air-jet looms, doubling output with less labor. In steel, the Nucor corporation used continuous casting machines to yield labor costs of $60/ton verses traditional steel’s $130/ton. Labor cost today is infrequently the driving force behind costs it was during the development period of cost accounting (1930’s). Instead, indirect costs have replaced labor as the dominant portion of costs for some products (Kelly, 1991). To use labor as the major basis for allocating as job costing or process costing accounting does, may lead to inaccurate decisions by management. The accounting profession has largely overlooked ABC. Among reasons cited for low adoption were employee resistance and the organizational changes essential with the use of ABC (Ness & Cucuzza, 1995). Some trace the source of hindered adoption of ABC to technical as well as cultural issues. Others feel that ABC would be more widespread in industry if it were marketed better by the accounts themselves (Brausch, 1992). There are several reasons for ABC low adoption rate. Complexity is an obstacle to implementing ABC. ABC requires detailed records of the costs associated with producing products and services as compared to traditional methods. This detailed record keeping requires more effort from the accountants and is more time consuming. The complexity of ABC can contribute to more errors. ABC can require more time to check and recheck to uncover errors. ABC generally requires more effort on the part of the accountant verses traditional methods and reduces the adoption rate of ABC. Another reason for not using ABC is the increased economies of scale. Many corporations are standardizing their products to reduce the costs to manufacture them. For example, Coca-Cola distributes its products in many different countries. The product varies very little in respect to packaging and manufacturing. Traditional methods of accounting can assign costs more easily, quickly and accurately for those products that have little or no product variation. ABC is a valuable tool in calculating the costs of producing varying product  lines. These differing product lines require more extensive accounting practices than traditional costing methods provide. The information obtained from ABC can help promote product lines that managers feel are profitable between those which should be eliminated. Labor is less frequently the major ingredient in the production process. ABC addresses this concern by examining and illustrating the overhead costs associated with particular activity centers. ABC describes these over head costs more accurately and is beneficial when increasingly more complex manufacturing processes are used. Adoption issues should be addressed to implement ABC method when costing decisions matter to managers. Bibliography: ReferencesBrausch, J.M. â€Å"Selling ABC: New Cost Systems Can Flounder if They Are Not Marketed.† Management Accounting, February 1992, pp. 42-46. Geishecker, M.L. â€Å"New Technologies Support ABC. â€Å"Management Accounting, March 1996, pp. 42-48. Kelly, K. â€Å"A Bean-Counter’s Best Friend.† Business Week, October 25, 1991, pp. 42-43. Ness, J.A. and T.G. Cucuzza. â€Å"Tapping the Full Potential of ABC.† Harvard Business Review, July/August 1995, pp. 130-131. Selto, F.H. and D.W. Jasinski. â€Å"ABC and High Technology: A Story with a Moral.† Management Accounting, March 1996, pp. 37-40. 17 Activity based costing Essay Executive Summary This report provides an analysis of Activity Based Costing systems and Conventional Costing systems to determine whether the application of Activity Based Costing concepts would be useful at DBS Consulting Services. A profitability analysis of the two consulting services offered by DBS Consulting Services (e-Commerce Consulting and Information Systems Consulting) was performed using Activity Based Costing and Conventional Costing. Using the conventional costing approach, the overheads of $342,000 were allocated at $129,960 (e-Commerce Consulting) and $212,040 (Information Systems Consulting). Using the Activity Based Costing approach, the overheads of $342,000 were allocated at $107,160 (e-Commerce Consulting) and $234,840 (Information Systems Consulting). Before implementing an Activity Based Costing system, management needs to assess the problems that the firm is facing so that the Activity Based Costing system can be designed to address those problems. DBS Consulting Services is in a tight local labour market and is having difficulty finding quality staff. It was found that E-Commerce Consulting Services provided a higher income per billings percentage than that of Information Systems Consulting Services (19% vs. 3%) under the Activity Based Costing approach. E-Commerce Consulting Services provided the higher return per sales dollar. These results would suggest that the professionals at DBS Consulting Services need to spend more time in e-Commerce. The success of failure of Activity Based Costing approach is determined by the reactions of the people who develop and use the system. An Activity Based Costing system can be costly and time consuming to  implement and maintain, it requires extensive training, expertise and information. However, the benefits of Activity Based Costing systems, being improved cost accuracy and assisting management with decision making, outweigh these costs. Introduction It is said that Activity Based Costing can result in improved costing accuracy when compared with Conventional Costing procedures. Arguments to support this claim are that companies who adopt Activity Based Costing are not limited to a single cost driver when having to allocate costs to their products and activities. Activity Based Costing allows companies to use non-unit cost drivers as well as unit cost drivers to allocate costs. Also, because use differs significantly amongst activities, no single cost driver can accurately assign costs for all activities whereas Activity Based Costing takes advantage of multiple cost drivers, not just a single cost driver. Arguments against this claim are that service industries often have higher levels of facility costs which mean fewer costs will be included in the Activity Based Costing system. Service industries also have a lot of non-repetitive activities which make it difficult to identify an individual activity to assign a cost driver to. Both the conventional costing system and the Activity Based Costing system calculate the cost of a product or service in relation to the revenue it generates. However, the conventional costing system assigns manufacturing overheads based on a volume-based cost driver, and Activity Based Costing systems assign the manufacturing and non-manufacturing overheads based on the activities required to produce the item. Part 3 Case Analysis Report – DBS Consulting Services (cont.) The Conventional Costing System Conventional costing approaches assume that manufacturing overhead costs are related to the volume of production which is usually measured by input measures such as direct labour hours or direct machine hours. The features of a conventional costing system are: Direct material and direct labour costs are traced to products Manufacturing overheads are assigned to products based on a pre-determined overhead rate The manufacturing overhead rate is calculated using a volume-based cost driver Non-manufacturing costs are not assigned to products The advantages of using a conventional costing system are: They are aligned with generally accepted accounting principles (GAAP) They are simpler than Activity Based Costing systems and easier to implement The disadvantages of a conventional costing system are: They are not as accurate as Activity Based Costing systems They can result in under-costing and over-costing of products They can lead to poor management decisions as non-manufacturing costs are excluded The Activity Based Costing System Activity Based Costing systems allocate manufacturing and non-manufacturing costs to a product based on the activities required to produce the item. Activity Based Costing systems calculate the cost of individual activities and then assign those costs to cost objects, such as outputs, based on the activities required to produce them. Activity Based Costing systems can be used to estimate the cost a product and also as a tool for management to monitor and control what is happening in the business by analysing the activity costs, the root causes of activities, the value of to the customer and measures of performance. The advantages of Activity Based Costing systems are: They provide a more accurate cost of products Manufacturing and non-manufacturing costs are included in the calculation They provide a greater understanding of overhead costs The disadvantages of Activity Based Costing systems are: Information can be misinterpreted by some users They can be costly to implement and maintain They involve major changes in data collection and analysis which can be challenging and also cause resistance amongst employees Current System at DBS Consulting Services Currently at DBS Consulting Services our administration costs (overheads) are allocated to both consulting services (e-Commerce and Information Systems) based on billable hours. The following analysis presents the profitability of the firm’s e-Commerce and Information Systems consulting services using Conventional Costing procedures and Activity Based Costing. Part 3 Case Analysis Report – DBS Consulting Services (cont.) Conventional Costing Procedures: Part 3 Case Analysis Report – DBS Consulting Services (cont.) Activity Based Costing Procedures: Analysis: Activity-based costing procedures result in a significant increase in the overhead costs allocated to Information Systems Consulting and a significant decrease in the overhead costs allocated to e-Commerce Consulting. The conventional costing procedures allocate overheads based on billable hours which results in 38% of overhead costs being allocated to e-Commerce Consulting (=1900 billable hours for e-Commerce / 5000 total billable hours), and 62% to Information Systems Consulting (=3100 billable hours for Information Systems / 5000 total billable hours). However Activity Based Costing shows that the overhead percentage allocations vary for each activity as summarised below. Part 3 Case Analysis Report – DBS Consulting Services (cont.) The e-Commerce Consulting services are allocated less overhead costs using Activity Based Costing when compared to the conventional costing approach. Using the conventional costing approach, $342,000 is allocated at $129,960 (e-Commerce Consulting) and $212,040 (Information Systems Consulting). Using the Activity Based Costing approach, $342,000 is allocated at $107,160 (e-Commerce Consulting) and $234,840 (Information Systems Consulting). E-Commerce Consulting Services provides a higher income per billings percentage than that of Information Systems Consulting Services (19% vs. 3%) under the Activity Based Costing approach. This shows that although both services are charged out at the same rate, and the labour rate for both services are the same, e-Commerce Consulting Services provides the higher return per sales dollar. By adopting the Activity Based Costing approach we can determine a more accurate method of allocating overhead costs to our services which in turn will provide more accurate profit analysis of each service. This will help to increase customer and shareholder value. Summary Given the very tight local labour market and the fact that it is difficult to find quality staff it would not be desirable for an aggressive expansion of either consulting service regardless of the fact that both generate a profit. If we opt to expand either service this would mean having to hire more qualified staff, which as mentioned above, is difficult in today’s competitive market. Before implementing an Activity Based Costing system, the following factors need to be considered: Management needs to show conviction that the benefits of the system will outweigh the costs Management and staff need to understand what Activity Based Costing is and how it can help the firm The requirement of resources to implement Activity Based Costing need to be considered Concerns about the resistance to change factors need to be addressed The success of failure of Activity Based Costing approach is determined by the reactions of the people who develop and use the system. Resistance to change can impede implementation, therefore in order to succeed, there must be a plan in place that is carefully thought out to take into account the factors above as well as determining the extent of change required and the different personalities involved. Employees should be encouraged to play a major role in developing and using the Activity Based Costing system to give them a sense of ownership and help them to view the system as a tool to help them manage their work. In conclusion, an Activity Based Costing system can be costly and time consuming to implement and maintain, it requires extensive training, expertise and information. However, the benefits of Activity Based Costing on improved cost accuracy and assisting management with decision making outweigh these costs. Part 3 Case Analysis Report – DBS Consulting Services (cont.) References Langfield-Smith, K., Thorne, H., & Hilton, R. (2012). Management accounting: Information for creating and managing value (6th edition). North Ryde, NSW, Australia: McGraw-Hill. Heisinger, K., & Hoyle, J. (2013.). Managerial Accounting,v.1.0. Retrieved April 10, 2014 from http:/catalog.flatworldknowledge.com Johnson, R. (n.d.). Traditional Costing Vs. Activity-Based Costing. Retrieved April 1, 2014 from http:/smallbuiness.chron.com Wilkinson, J. (July 23, 2013). Activity-based Costing (ABC) vs Traditional Costing. Retrieved April 1, 2014 from http:/strategiccfo.com Marx, C. (n.d.). Activity Based Costing (ABC) And Traditional Costing Systems. Retrieved April 4, 2014 from http:/financialsupport.weebly.com Keshav. (n.d). Advantages And Disadvantages of Activity-Based Costing (ABC). Retrieved April 1, 2014 from http:/accountlearning.blogspot.co.nz Delaware Technical Community College. (n.d.). Retrieved April 1, 2014 from https://www.dtcc.edu

Legalized Marijuana in Almost Half of States Let’s Go to America

The United States seem to be rather quickly becoming a more comfortable place for cannabis users – the laws decriminalizing the possession and usage of recreational marijuana are being passed regularly. Delaware recently became the 18th state to pass legislation in this respect, and the situation will probably develop in the same fashion in the near future. Although it doesn’t mean that complete legalization is to be expected soon, it is a big step in this direction. Nevertheless, prohibition on federal level is still in power, despite a prospective bill aimed at complete decriminalization of marijuana being in the works since 2013. If this bill is passed, marijuana will turn from an illegal or barely legal drug into a substance regulated in the same manner as alcohol. Other bills aim at allowing state governments to decide for themselves what their take on marijuana and its legalization should be. So far there are 18 states that have already decriminalized possession of recreational marijuana (albeit in rather small dozes, and users still can be fined for smoking it in public places) and 23 (plus District of Columbia) that allow to use cannabis for medical reasons. Terms of legalization vary – in Washington, for example, one can freely smoke weed at home, grow up to six plants (again, at home) and have up to two ounces of the stuff in possession at any time. However, if you live in a state that has already passed some kind of legalization law, you still should be wary – marijuana remains an illegal narcotic drug according to the United States federal law, thus occupying a legally gray area. So, what lies in the future? It seems now that full legalization is only a matter of time. Not only an increasing number of Americans admit on smoking pot at one or another period of their lives – in 1969, the first time such a poll was carried out, only about 4 percent of those asked admitted to it. Today it is 44 percent. That means that either the usage of marijuana in America is steadily on the rise, or the taboo on talking about it is becoming less prominent, or a mixture of both. It goes hand in hand with a record percentage of population being in favor of legalization, with 53 percent of Americans believing that ban on marijuana should be lifted. And not all of these 53 percent are smokers, with possible reasons for supporting legalization varying wildly. Some believe that it isn’t government’s business to allow or ban consumption of a seemingly harmless substance, some pay special attention to racial aspects of the matter, some concentrate on possible medical and social benefits of legalization. Legalization is supported by people often of diametrically opposite views on most other subjects. This doesn’t, of course, mean that this support is universal. A large portion of the population is violently opposed to the idea – and how they are going to deal with it is a matter of the future.