Chapter 19: Emerging Management Practices IM 9
©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a
publicly accessible website, in whole or in part.
a. Open-book management is a philosophy about increasing a firm’s performance by involving
all workers and by ensuring that all workers have access to the operational and financial
information necessary to achieve performance improvements.
b. Firms practicing open-book management typically disclose detailed financial information to all
employees, train them to interpret and use the information, empower them to make decisions,
empowered employees to make decisions.
c. Merely opening the financial records to a firm’s employees will not necessarily solve any
problems or improve performance; the key to understanding the records is training.
2. Using Games to Teach Open-Book Management
a. Games can be used to teach financially unsophisticated employees how to understand and
use accounting and financial information.
improve profits.
i. The “game” of trying to increase profits serves as motivation for workers to learn about
cost and operational management methods.
3. Motivating Employees
a. The obvious way to motivate workers to use the game information to improve profits is to link
their compensation to profits.
delivery rates, defect rates, output per labor hour, and other measures to make workers
aware of how their inputs and outputs affect other departments and financial outcomes.
Chapter 19: Emerging Management Practices IM 10
©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a
publicly accessible website, in whole or in part.
i. All critical dimensions of performance including cost, quality, and investment
management can be captured in performance measurements.
d. As soon as workers have become accustomed to receiving financial and other information to
4. Implementation Challenges
a. Open-book management can be difficult to implement.
i. Characteristics of firms that are best suited to a successful implementation include small
b. One significant obstacle to overcome in most organizations is a history of carefully guarding
financial information.
i. Even in publicly owned organizations that are required to release financial information,
Accountants have historically viewed themselves as the custodians of this sensitive
c. Accountants must develop ways to convey accounting information so that unsophisticated
d. The information system must be designed to be sensitive to the user’s financial
sophistication.
e. Similarly, performance measures that employees can understand must be devised.
f. Finally, because principles of open-book management include involving all employees and
Chapter 19: Emerging Management Practices IM 11
publicly accessible website, in whole or in part.
LO.7: What are the three generic approaches that firms can take in controlling environmental
costs?
I. Environmental Management Systems
1. The impact of organizations on the environment is of increasing concern to governments,
citizens, investors, and managers.
with its financial record when making investment decisions.
2. Management of environmental costs requires the consideration of environmental issues in every
aspect of operations.
disposing of products and packaging.
3. There are three generic strategies for dealing with environmental effects of operations, each with
its own unique financial implications.
scrubbers.
b. A second strategy involves process improvements.
i. Process improvements involve changes to recycle wastes internally, reduce the
4. Although minimizing the impact of operations on the environment may be a reasonable goal, it
must be consumed to manufacture products.
5. Other managerial concerns related to environmental costs include managing quality, research
and development, and technology acquisition.
highly related.
Chapter 19: Emerging Management Practices IM 12
©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a
publicly accessible website, in whole or in part.
b. Research and development identifies new products and new production processes, and
develops new materials.
c. New product design influences the (1) types and quantities of materials produced, (2) types
d. Technology acquisition also has many environmental impacts.
i. For instance, technology affects energy consumption and conservation; environmental
operating.
6. Text Exhibit 19.11 (p. 791) lists considerations for the financial professional to evaluate to
determine whether a firm’s information systems provide relevant information for managing
environmental costs.
Chapter 19: Emerging Management Practices IM 13
publicly accessible website, in whole or in part.
Multiple Choice Questions
1. (LO.1) Which of the following is not a major business trend promoting the increased use of
business process reengineering?
2. (LO.1) Business process reengineering changes the way firms execute processes by:
a. making better use of technology.
3. (LO.2) Global competition is forcing firms to downsize and restructure operations to:
a. defend core competencies.
4. (LO.2) One of the grim realities of ever-improving efficiency is that
a. Input costs are declining
5. (LO.2) The data, facts, experiences, and lessons learned important to an organization’s existence
are referred to as:
a. a data depository.
6. (LO.3) Different languages and cultures can impede communication within globally dispersed
c. Because accounting is the universal language of business
d. All of the above
7. (LO.4) All of the following are objectives of enterprise resource planning (ERP) systems except:
a. to automate accounting processes.
8. (LO.4) Installation of an ERP system impacts the financial function in all of the following ways
except:
management decisions.
d. Finance specialists are accountable for integrating externally purchased data with internally
generated data.
Chapter 19: Emerging Management Practices IM 14
9. (LO.4) Which technique uses statistical techniques to uncover answers to important questions
about business operations?
a. venture capitalists.
11. (LO.5) An agreement involving two or more firms to jointly contribute to the supply chain
a. involves the exploitation of partner knowledge.
d. all of the above.
12. (LO.6) Characteristics of firms that are best suited to a successful implementation of open–book
management include all of the following except:
a. small size.
b. centralized management.
c. a history of employee empowerment.
13. (LO.6) Open-book management:
unsophisticated employees.
14. (LO.6) Which of the following is not a common principle of open-book management?
d. Turn the management of the business into a game that employees can win
15. (LO.7) Which of the following is not a general approach to controlling environmental costs?
a. Signing the Kyoto Protocol to reduce pollution
Chapter 19: Emerging Management Practices IM 15
Multiple Choice Solutions
1. a
2. a
3. d
4. c
5. d