Solution manual cost and managerial accounting by barfield 3rd emerging management practices

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Chapter 17 Emerging Management Practices Questions Two of the major factors pressuring managers to develop innovative practices are the advancement of technology and the globalization of competition Advancing technology has increased the quality level of production processes and allowed more processes to be automated Advancing technology has also led to greater integration of information systems Globalization of competition has increased the quality and intensity of competition Business process reengineering, BPR, is a method of examining processes to identify and then eliminate, reduce, or replace functions and processes that add little customer value to products or services BPR is a tool to achieve radical changes in business processes Managers apply BPR to achieve wholesale gains in cost or quality BPR is an effective tool to improve quality First managers must identify the sources of quality problems Then, BPR can be applied to replace, change, or eliminate those processes Finding ways to better satisfy customers by improving quality, reducing costs (prices), or increasing functionality of the product or service is the objective of applying BPR techniques A company must understand how the customer derives value from the product or service and how the customer assesses quality before it can effectively reengineer processes BPR is a tool that leads to revolutionary changes in operations Often these changes leverage technology and reduce the required labor content of a process or product The consequence of reduced demand for labor is reduction of the workforce 197 198 Chapter 17 Emerging Management Practices Downsizing is any management action that reduces employment and restructures operations as a response to competitive pressures To maintain or increase market share in today’s competitive markets, firms must continually strive to increase the quality and functionality of products while reducing costs These pressures cause firms to continually evaluate their processes and increase their dependence on evolving technologies As the level of automation increases, efficiency increases and the demand for labor is reduced Layoffs are the inevitable result The risks include the depletion of future talent pools, a permanent loss of organizational knowledge, a loss of trust between management and workers, and destruction of a corporate culture of cooperation between managers and workers Downsizing is an accounting issue because it is a financial decision Costs and benefits of downsizing must be analyzed like any other long-term decision Also, there are financial reporting issues to be examined including the financial consequences of severance packages, employee retraining, and the sale of idle assets A downsizing decision involves the comparisons of costs and benefits The largest benefit derived is the savings in labor costs that will occur over future periods The costs are mostly incurred currently for restructuring costs Because costs and benefits not occur within the same periods, capital budgeting tools using discounted cash flow analysis must be used to account for the time value of money 10 The expansion of operations around the globe has increased the diversity of the workforce of many firms Employees of large firms often speak different languages, and have different cultures, religions, and work habits The accounting systems in global firms face an increased burden because accounting is often the only language that is common to all managers and employees and, therefore, the only language in which communication can occur freely without an interpreter Chapter 17 Emerging Management Practices 199 11 In the United States, increased diversification has resulted from both the passage of new laws and the selfserving actions of firms Federal, state, and local governments have enacted statutes to pursue affirmative action programs and outlaw discrimination However, many firms now pursue diversification beyond the legal mandates because managers believe a more diverse workforce offers advantages in serving a diverse customer base 12 ERP systems are packaged software programs that allow companies to automate data gathering and processing and integrate information feeder systems to provide useful real-time information to managers ERP systems differ from prior generations of systems in the extent to which the various feeder systems (e.g., payroll, accounts payable) are integrated into a common database ERP systems also integrate supply (value) chains to a much greater extent than previous production management systems 13 ERP systems link the customer to the rest of the supply chain through, typically, a Web-based front door The customer can place an order for a product or service on the Internet The processes and inputs necessary to satisfy the customer order are then coordinated by the ERP software throughout the supply chain 14 ERP systems are built from combining modules A typical installation includes 30 or more separate modules Each module corresponds to a domain of activity or accountability For example, typical modules include order processing, manufacturing, receiving, and cash collections 15 An ERP system is built around a central data bank Data are entered into the central repository through modules or feeder systems Data from the various feeder systems can then be linked in the central repository and manipulated to suit the needs of the information user 200 Chapter 17 Emerging Management Practices 16 The finance function is affected in three ways by the implementation of an ERP system First, finance and system specialists bear primary responsibility for selecting and installing the ERP software Second, finance specialists bear responsibility for manipulating and evaluating the information in the central repository to meet the information needs of managers Third, the finance specialists bear the responsibility of maintaining the integrity of the data in the central repository from intentional or incidental contamination 17 Data mining is the application of statistical techniques to data for the purpose of gaining new insights about problems or opportunities An ERP system facilitates data mining because the central repository of information contains a rich database of all important aspects of operations: financial, customer, supplier, etc 18 Strategic alliances are agreements between firms that result in their combining competencies and resources to create products and services for customers Strategic alliances are increasingly used today because they are an effective response to competitive pressures Firms have been forced to select core competencies that they will maintain and defend If delivery of a product or service requires core competencies not possessed by a given firm, that firm must contract with another firm or firms to provide those competencies A strategic alliance is a flexible approach to combining the needed competencies to deliver high-quality goods and services to customers at competitive prices 19 Strategic alliances can take many forms including joint ventures, equity investments, licensing, joint R&D arrangements, technology swaps, and exclusive buyer/seller agreements Chapter 17 Emerging Management Practices 201 20 One of the first decisions to be made is whether a new entity will be established to execute the business of the strategic alliance If a new entity is established, a decision as to the type of entity to form is made A system of governance must also be established This process may involve establishing a separate board of directors from the managers of the participating firms Also, an agreement must be executed to establish the rights and responsibilities of each participant, including what each is expected to contribute and what each is entitled to receive from the strategic alliance Finally, strategies, operating plans, and control systems must be devised so that the objective for which the strategic alliance was formed is realized 21 Open-book management is a philosophy about the use of information in a business The central idea of open-book management is that information should be shared and consumed by all organizational participants—not just managers This view about information contrasts with the more traditional view in which information is regarded as an asset that must be safeguarded, and access to it must be limited to managers who are trained in its use 22 The implementation of open-book management changes the roles of accountants Accountants must no longer act as guardians of information but become purveyors of information Additionally, accountants must devise ways to help unsophisticated users of information develop skills and abilities in consuming financial data Games are often devised to aid in this process 23 Games can create an incentive to use financial information For workers who are unsophisticated in the use of accounting data, a simplification of the data can be made by the accounting staff and be presented in the guise of a game By tying employee compensation to the outcomes of the game, an incentive is created for employees to perform well in the game As employees strive to compete in the game, they consume information to improve their performance Thus, the game can be used as a device to create demand for information As employees observe ways to use the information to improve their performance, they eventually observe that information is a tool they can use to achieve larger rewards 202 Chapter 17 Emerging Management Practices 24 Accountants must find ways to simplify accounting information to bring it within the grasp of less sophisticated workers Games are one tool to achieve this result Additionally, accountants can devise simplified accounting systems that capture the most important dimensions of performance for employee groups As the groups master the use of the simplified information systems, more complete information systems can be substituted 25 If managers or employees have not been accustomed to consuming financial or other data in executing their duties, an inducement may be necessary to motivate their use of information If employees’ rewards are dependent on their skillful use of information, then an incentive is created for the employees to become better consumers of information 26 Generally, smaller firms will have more success than larger firms in implementing open-book management because each employee’s contribution to the bottom line is more identifiable Firms with decentralized structures are more suited to open-book management because they require lower level managers and employees to make decisions and be accountable for results Environments in which there is a high level of trust between managers and workers will stand a much better chance of surviving the cultural changes that must occur to implement open-book practices 27 The environmental impact of company operations has become a major concern of managers for two reasons First, legislation has imposed a larger burden on firms to be accountable for environmental emissions and other environmental impacts Second, the capital market has become sensitive to environmental issues because of the potentially large costs associated with remediation of environmental damage 28 The first strategy is to clean up environmental contaminants after they have been produced The second strategy is to develop processes to reduce and recycle waste that is created The third strategy is to avoid producing pollutants in the first place Economically, none of these strategies will dominate the others in every circumstance However, over the long run, the goal should be to reduce the production of environmental waste Chapter 17 Emerging Management Practices 203 Exercises 29 a Without training the firm will have a smaller probability of successfully implementing the software Additionally, training is necessary to understand the features and functions of the technology and to accelerate the generation of benefits of the implementation b The financial experts in a business play important roles in technology acquisitions Before technology is acquired, financial experts analyze the costs and benefits to determine if new technology is justified Next, financial experts help screen the products of competing vendors to identify the product that meets the firm’s needs at the lowest cost Finally, the financial experts manage the process of implementation to ensure that the product functions as promised by the vendor and confirm that the costs incurred and benefits generated are consistent with the expectations 30 The use of higher technology is commonplace in business today Further, technology is increasingly a major component of strategies being planned and executed by firms Financial professionals, having responsibility for managing the process of technology acquisition, must now have a broader understanding of their businesses Without fully understanding competitive strategies and business operations, financial professionals will be unable to make the appropriate recommendations about acquiring new technology and will not be capable of understanding whether technology is serving as an effective strategic and operational tool 31 There is currently debate in the academic and practitioner communities as to how TQM and BPR relate to each other While some argue that BPR can be viewed as a tool of TQM, others argue that BPR is a philosophy about achieving revolutionary changes in operations while TQM is more about seeking continual, incremental improvements in operations 32 No solution provided Chapter 17 Emerging Management Practices 204 33 The Japanese management culture has long embraced the ideal of lifetime employment Downsizing in a Japanese company that has faithfully pursued lifetime employment would be best accomplished by reductions in future hiring and natural attrition Any layoffs of employees would be very disruptive to the business culture Japanese managers typically prefer to make cuts virtually anywhere else in their operations before laying off employees 34 a The layoffs are apparently coupled with some degree of product rationalization Clearly, the company is proceeding with a change in product offerings b Analysts probably interpreted this announcement as bad news largely because they viewed the layoffs not as an effective response to control costs, but as evidence that the strategy Agere elected to pursue was failing 35 No solution provided 36 At a minimum, the financial professionals can monitor compliance with existing laws and ethical guidelines pertaining to diversity However, if greater diversity is stated to be an organizational objective, the financial experts in the business can develop control systems to set objectives for diversity, monitor achievements, and connect achievements to managerial rewards By developing formal measuring and reporting systems, managers will be forced to consider how their hiring, promotion, and performance evaluation criteria influence the objective of greater diversity Chapter 17 Emerging Management Practices 205 37 The steel manufacturer may benefit from using open-book management techniques To implement open-book methods, training should be provided to all employees and simple games devised The training of workers could employ the Monopoly Game In presenting the concept of games in openbook management, using the Monopoly Game to illustrate concepts could be very effective for the following reasons:  Monopoly is a widely known game with which managers and employees are likely to be familiar  Monopoly provides payoffs to players in cash and requires players to settle their obligations with cash Thus, the game would help introduce simple cash flow concepts and subsequent accounting information  There is only one winner in the game of Monopoly, and that is the individual who accumulates the most cash and property Thus, the game reinforces the object of the exercise to win by becoming the most profitable Training must also be provided to the accounting staff and managers The accountants must be trained to develop measurement systems for the games that are created and to provide training to workers to understand and use the information in their games Managers must be trained to understand the role of games in open-book management and to learn how to develop games to improve operations Finally, a pilot project could be used to see how openbook management could be implemented firmwide and to identify any problems that are likely to be encountered in the implementation 38 Through the Internet storefront much demographical information can be gathered about purchasers of products including information about gender, race, age, marital status, economic status, hobbies, and buying habits This information can be related to product sales The idea is to develop profiles of buyers of particular types of products Once such profiles are compiled, specific target groups of customers can be contacted using questionnaires, phone calls, and e-mail to obtain input about details of features, price points, and quality expectations so that as the car is designed, fairly precise specifications regarding price, quality, and functionality can be followed Chapter 17 Emerging Management Practices 206 39 a Customer satisfaction should improve because a closer link between manufacturing and marketing allows more customer feedback to be incorporated into product design Further, marketing experts would be more readily able to provide their perspectives on product design issues b Much of the time required to bring a new product to market is consumed in the design stage By having a greater flow of information between engineering and marketing, engineering could be more quickly and completely informed about customer concerns and preferences about product features and quality c Cost management efforts would benefit from a greater flow of information between marketing and engineering One specific benefit should be a reduction in nonvalue-adding features in products because of the greater ability of the marketing function to deliver the customer perspective to engineering 40 Before ERP software, information would be communicated sequentially through the supply chain from the final consumer to the most upstream supplier Information was only conveyed link-by-link through the supply chain, and actions were only coordinated between one link and the adjoining links By using the Internet, the firm interacting with the customer can post its master production schedule where it is available to the entire supply chain simultaneously By sharing information in real time throughout the entire value chain, coordination of activities can occur across all links of the supply chain 41 No solution provided Chapter 17 Emerging Management Practices 207 42 The establishment of a strategic alliance requires all of the systems and structures required to form any new business The financial professional should provide input on issues such as the organizational form of the strategic alliance, the organizational structure of the alliance, and financing Further, the financial professional should be directly responsible for developing management control systems, financial reporting systems, reward structures for management and employees, and product costing systems Once the strategic alliance is operational, the financial professional should contribute to the ongoing management of the business including participating in planning, decision making, and performance evaluation 43 Currently employees in the production department are not evaluated or compensated based on the quality of their work Open-book management can be used to change the behaviors of employees by changing their incentives The first step in implementing open-book management in the production department would be to develop performance measures of quality Traditional measures such as scrap, waste, rework costs, and nontraditional measures such as customer satisfaction levels with quality could be developed Although dollars could be used as the unit of measurement, physical units would be more readily grasped by the workers (for example, pounds of materials wasted rather than dollars of materials wasted) The second step in the implementation of open-book management would be to train workers to understand how the performance measures capture their actions and how they can affect the measures The training sessions should precede the actual use of the new performance measures The final step in the implementation would be to link the pay of the workers to the new performance measures In this step, the workers are provided the incentive to improve quality performance measurements Training sessions would be required to help workers understand how they can improve their performance rewards by improving the quality of their output Finally, a game could be devised to use in training sessions that would demonstrate to the workers how quality measurement and employee rewards are linked and how changes in the performance measures lead to changes in the payoffs Chapter 17 Emerging Management Practices 208 44 45 46 a An end-of-pipe strategy could be applied to this waste An end-of-pipe strategy is most applicable to situations in which the waste is of low toxicity, can be disposed of safely and at relatively low cost, and costs would be exorbitant to eliminate or dramatically reduce the waste b This waste is a likely candidate for total elimination Because it is highly toxic and can be disposed of only at great cost, the most likely strategy is to redesign production processes so that the waste will not be produced c This waste is a candidate for recycling Because the waste is nearly identical to a purchased product, it is likely a substitute for that purchased product if it can be cleansed of impurities a Johnstown Chemical is considering a strategy of waste elimination/reduction through process improvement b Discounted cash flow techniques would be appropriate for the financial analysis because the cost to acquire the improved processes occur in one period and the benefits of the process improvements occur in subsequent periods Discounted cash flow methods would put the cash flows occurring in different periods on a common basis by using their equivalent present values No solution provided Chapter 17 Emerging Management Practices 209 Cases 47 a b Analysts would have two competing effects to evaluate On the one hand, higher profits in the near term increase the ability of the firm to remain solvent, maintain liquidity, and provide a return to investors in the form of dividends Alternatively, cutting R&D spending may result in a reduction in the growth of the firm A slower growth rate implies profits in the future will be lower than levels that are reasonably achievable before the cut The result will be lower profits to be distributed in the future to shareholders Whether an analyst would interpret the announcement as good news or bad news would depend on which of the two preceding effects the analyst identifies as the dominant effect As indicated in the article, convincing evidence supports the long-run payoff for management in encouraging innovation The mean market-to-book ratio of 3,500 companies tracked during the 24-year period between 1964 and 1998 rose 4.3% with each 1% increase in R&D spending Financial professionals in a company should promote and maintain in top management a high level of awareness of the importance of using both short-term and long-term performance measures by which to guide the company Among the long-term performance measures, R&D spending and the market-to-book ratio should be monitored and analyzed on a scheduled basis Benchmarking performance at best-in-class companies of such performance can also be used to keep management focused 210 48 Chapter 17 Emerging Management Practices The accounting function can help top management identify talented managers Although layers of middle managers have been eliminated by business restructurings, the eliminations have been made possible by the decentralization of information, authority, and responsibility The accounting function has assumed an important role in decentralization by providing the necessary plans, performance measurements, and information systems Because accountants have managed the information flow that has facilitated decentralization, they have extensive data on the performance of many internal managers By comparing the performance of individual managers to reasonable benchmarks such as historical performance, expectations, performance of other internal managers, and competitor performance, accountants can identify the subset of managers who have outperformed their peers This subset can serve as a talent pool to fill vacated top executive positions Chapter 17 Emerging Management Practices 49 211 The memo to Ms Gale should address the following points:  The implementation of open-book management should be preceded by training Specifically, Mr Wallace must receive training so that he will understand the accounting information that he is to be provided The training must also show Mr Wallace how the accounting information can be used to change operations in his department  The financial information that is to be used as a basis for managing specific departments may need to be modified to match the sophistication of the information consumer For instance, in the case of Mr Wallace, the overhead information may be more difficult to comprehend than information regarding direct costs Consequently, the information system may be more effective if it provides only information on direct costs initially  Selecting overhead as the first cost item to reduce is likely to be less successful than selecting direct costs Furthermore, many of the items that comprise overhead may not be controllable by Mr Wallace In choosing accounting measurements to evaluate Mr Wallace’s performance, care should be taken to make certain that only aspects of operations that Mr Wallace can control are included in performance measurements  If Mr Wallace is to be evaluated based on accounting measurements, he should not be told by others where to begin improving cost performance He should be given the autonomy to make his own decisions about how he will proceed to achieve cost reductions  Rather than implementing open-book management techniques simultaneously in all departments, perhaps a pilot project should be initiated first so that unforeseen implementation issues can be addressed before a broad implementation is attempted  The accounting department should have been consulted before attempting to implement open-book management in any department The cooperation and knowledge of the accounting department will be necessary to design an effective information system to serve the various managers who will be involved in the new management practice Chapter 17 Emerging Management Practices 212  50 a Before implementing open-book management in any department, study should be given to the performance measurements that will be appropriate for each department The performance measurements must be designed to create the correct incentive for each departmental manager Miltown’s gross profit has declined from $160 to only $45 within the past year At the same time, the industry average gross profit declined at a much slower rate: from $140 to $75 The decline in the average gross profit of the industry signals that the industry has become more price competitive, and the larger decline for Miltown indicates that Miltown was unable to achieve cost reductions at the same pace as the industry achieved cost reductions For the first quarter of 2002, Miltown had a market share of approximately 13 percent (4,200  32,000) Even though total industry unit sales were higher in the first quarter of 2003 than in the first quarter of 2002, Miltown’s unit sales slipped and Miltown’s market share dropped to about 8.6 percent (3,450  40,000) This information indicates Miltown’s selling price did not drop as fast as the industry average and sales were lost as a result This is confirmed by calculating average sales price for Miltown for the first quarter of 2002, $1,525 ($6,405,000  4,200), and comparing that price to the price for the first quarter of 2003, $1,350 ($4,657,500  3,450) Thus, Miltown’s sales price dropped from $1,525 to $1,350 while the industry average price dropped from $1,640 to $1,310 Although Miltown’s price was well below the industry average in the first quarter of 2002, it was well above that average for the first quarter of 2003 This was the main reason unit sales and market share declined over the past year Because Miltown has no quality or functionality advantage over other industry competitors, the company must find ways to reduce its price to regain market share and unit sales To reduce its price, the company must find ways to substantially reduce its costs Chapter 17 Emerging Management Practices b 213 Several ways to reduce costs are evident First, Miltown produces about 83 percent of its components This is much higher than the industry average of 57 percent Thus, Miltown should consider outsourcing some components Second, Miltown should consider relocating the most labor-intensive operations to sites that have lower labor costs The two major competitors that moved to China obviously did so to obtain a labor cost advantage Miltown must find some way to match its competitors in reducing labor costs Another possibility is for Miltown to consider acquiring more machine-intensive production technology to reduce the labor content of its transmissions A third cost reduction approach is to consider the application of business process reengineering to redesign production operations for greater efficiency A fourth possibility is to redesign the transmission to remove costs A target costing system could be applied to develop target costs for each major component The target costs of components could be used as a basis for negotiating prices with vendors for outsourced components Miltown has less opportunity than other firms to use value chain analysis to remove costs because the company presently produces a very high percentage of all transmission components Finally, the company might consider developing incentives for internal cost reduction Open-book management techniques could be applied to create incentives and generate downward pressure on costs 214 51 Chapter 17 Emerging Management Practices and Barnes and Nobles differ from each other in both the way they interact with their customers and in their supply chains These differences should be reflected in the ERP recommendations Because maintains only an electronic store as opposed to a physical retail space, it has a different set of opportunities from that of Barnes and Noble connects with consumers through its Web site It can provide products to consumers either through its own inventories or by interacting with the publisher of a specific book Amazon’s customer links should determine the relative popularity of the many books sold on its site For higher volume books, an opportunity exists for Amazon to maintain a ready inventory For low-volume books, it may be more economical for Amazon to simply have the publisher provide the book to the consumer The key functions for the ERP system at Amazon are to identify tastes and preferences of specific customers and link the customer order to either a warehouse shipment or a publisher shipment By developing a database of customer-specific tastes, as new books are released, direct e-mail solicitations can be delivered to prospective buyers Similarly, the projected sales of new releases can be the basis for managing warehouse inventories and making the decision regarding which items to maintain in inventory and which to have shipped directly from publishers Barnes and Noble has interactions with its customers both in person and via an Internet storefront The back end of Barnes and Noble also is very different from Amazon Barnes and Noble maintains physical retail locations and warehouses that must provide inventory to meet both Internet sales and retail store sales Further, Barnes and Noble has the same opportunity as Amazon to have publishers ship lowvolume products directly to consumers for Internet sales and special orders obtained from its retail stores Regarding its Internet storefront, Barnes and Noble’s operations are similar to Amazon and would likely have similar information requirements However, Barnes and Noble’s retail operations depend on sales in a local geographical area rather than global sales Success of the retail outlets requires management of customer data on a local level to maximize retail sales and on a corporate level to manage warehouse inventory Upstream, the ERP software must connect the warehouse operations to the retail outlets and the Internet outlet Chapter 17 Emerging Management Practices 52 215 Several recommendations can be made based on the data given First, the company can develop a more environmentally sensitive chart of accounts This change would allow the company to improve its understanding of the level and causes of environmental costs Second, the environmental costs should be charged to specific jobs so that a more accurate cost can be determined for all products produced Next, responsibility for controlling environmental costs should reside with a specific individual or set of individuals Once the chart of accounts is modified to better capture environmental cost data, formal strategies can be developed for reducing those costs This requires that specific managers be made accountable for achieving environmental cost cuts To achieve environmental cost cuts, specific strategies must be devised for controlling environmental effects Beginning with the most toxic wastes, strategies must be developed to eliminate waste where feasible, reduce waste elsewhere and properly dispose of any wastes that remain A strategy should be developed for each category of waste Accountability for eliminating, reducing, recycling, and properly disposing of wastes must be established, and methods must be devised to measure results and reward the managers for their efforts Reality Check 53 a The level of competition in the global business environment requires a high level of cooperation and information sharing between managers and employees If there is mistrust between the two groups, the performance of the organization will suffer Unethical treatment of employees will cause employees to not trust managers Both groups will ultimately suffer because the performance of the firm will be below levels that could have been achieved Consequently, the ethical treatment of employees is likely a prerequisite for a firm to achieve high levels of performance b Open-book management is a philosophy that requires a very high level of trust between employees and managers A company’s use of downsizing as an organizational strategy is inconsistent with the culture in which open-book management could be successfully implemented Chapter 17 Emerging Management Practices 216 54 55 a Strategic alliances involve a greater degree of integration of two or more companies than is obtained in traditional supplier/customer relationships Accordingly, there is greater dependence between the partners in determining the quality of the output Also, it may be more difficult for a firm to exert pressure on a partner, than a supplier, to improve quality Each partner is likely to have some autonomy in determining how it will fulfill its role in the alliance Therefore, the ability to manage quality in a strategic alliance may depend heavily on selecting partners that are quality oriented b As in all business enterprises, the accounting function can contribute to the measurement, and therefore the management, of quality And, as in all businesses, the contribution of the accounting function will be maximized when its measurements of quality are linked to incentives of specific managers who can control quality a The success of price-based competition is linked to the cost structure of the competitor If GM has higher costs than its rivals, it will not be able to successfully use price-based competition Its rivals will be able to underprice products with similar quality and functionality and take market share from GM b Greater flexibility to outsource components should have a positive impact on quality Because GM would always have the choice to make components that can’t be obtained from a vendor with the appropriate level of quality, the overall level of quality should only increase Particularly, if there are vendors that can produce at a competitive price, but at higher levels of quality than GM’s internal operations, outsourcing would improve the quality of the final product Chapter 17 Emerging Management Practices 56 57 217 c GM has an ethical obligation to its existing employees to be fair in its negotiations However, if GM is not given greater flexibility to outsource, eventually its entire employee base could be in jeopardy as the inflexibility may lead to a less competitive position in the industry, especially relative to tough foreign competitors such as Toyota Thus, a loss of some jobs currently because of greater outsourcing may lead to more stability for the remaining jobs at GM Furthermore, before outsourcing components, GM should evaluate whether changes in internal operations would result in sufficient improvement to diminish the need to outsource a Not all projects can be justified on a financial basis.  Projects that involve environmental safety, employee  safety, and other social projects often have to be  evaluated on nonfinancial terms.  Furthermore, some  projects have to be undertaken to keep the company from  violating federal, state, or local law.  b The ultimate consequence could be fines imposed by the  EPA or other governmental bodies, financial losses  suffered through civil litigation, or the arsenic may  cause illness in employees or others who are exposed.   The ultimate concern is that someone would be seriously  injured or fatally injured by the poison c It can be justified on the basis of the huge financial  losses (through fines, penalties, and litigation) that  could result if the contamination is discovered, and on  the basis of the need to comply with existing laws  dealing with environmental protection and environmental  contamination a The toxicity of wastes can be depicted as a continuum.   Some waste is harmless and some represents a threat to  large populations of people and other organisms.   Realistically there are some waste materials that should not be produced regardless of the economic gain that is  sacrificed.   Chapter 17 Emerging Management Practices 218 b Many examples exist of companies knowingly disposing of  waste improperly for financial gain.  In many instances  improper disposal was simply regarded as the least  expensive way of conducting business.  There are many  arguments against improperly disposing of waste.   Ethically, it is difficult to justify the  endangerment of an innocent population to preserve jobs The tacit nature of improperly disposing of waste  necessarily means that many people endangered by the  waste are uninformed of the threat If the company’s only means of survival is the  improper disposal of waste, it’s economic future is not  in doubt.  In a matter of time the company will fail.   The improper disposal of the highly toxic waste is  hardly worth merely extending the inevitable failure The greater the toxicity of the waste, the greater  is the likelihood that adverse effects will result.   However these effects manifest, they will exist as clues of the improper disposition and increase the likelihood  of ultimate detection.  If detected, the financial  consequences will surely far exceed the costs of  properly disposing of the waste in the first place ... Open-book management techniques could be applied to create incentives and generate downward pressure on costs 214 51 Chapter 17 Emerging Management Practices and Barnes and Nobles... between management and workers, and destruction of a corporate culture of cooperation between managers and workers Downsizing is an accounting issue because it is a financial decision Costs and benefits... safely and at relatively low cost, and costs would be exorbitant to eliminate or dramatically reduce the waste b This waste is a likely candidate for total elimination Because it is highly toxic and
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