Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed
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| 22.16 Balanced scorecard, ethics. (40 min) 1 Yes, the Household Products Division (HPD) should include measures of employee satisfaction and customer satisfaction even if these measures are subjective. Fora maker of kitchen dishwashers, employee and customer satisfaction are leading indicators of future financial performance. There is a cause-and-effect linkage between these measures and future financial performance. If HPD’s strategy is correct and if the scorecard has been properly designed, employee and customer satisfaction information is very important in evaluating the implementation of HPD’s strategy. HPD should use employee and customer satisfaction measures even though these measures are subjective. One of the pitfalls to avoid when implementing a balanced scorecard is not to use only objective measures in the scorecard. Of course, HPD should guard against imprecision and potential for manipulation. Patricia Conley appears to be aware of this. She has tried to understand the reasons for the poor scores and has been able to relate these scores to other objective evidence such as employee dissatisfaction with the new work rules and customer unhappiness with missed delivery dates. 2 Incorrect reporting of employee and customer satisfaction ratings to make divisions performance look good is unethical. In assessing the situation, the Ethical Guidelines for Management Accountants (summarised in Exhibit 1.7) that the management accountant should consider are listed below. Competence Clear reports using relevant and reliable information should be prepared. Preparing reports on the basis of incorrect employee and customer satisfaction ratings in order to make the division’s performance look better than it is violates competence standards. It is unethical for Conley to change the employee and customer satisfaction ratings in order to make the division’s performance look good. Integrity The management accountant has a responsibility to avoid actual or apparent conflicts of interest and advise all appropriate parties of any potential conflict. Conley maybe tempted to report better employee and customer satisfaction ratings to please Emburey. However, this action violates the responsibility for integrity. The Ethical Guidelines require the management accountant to communicate unfavourable as well as favourable information. Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5 th Edition, Instructor’s Manual © Pearson Education Limited 2012 Objectivity The management accountant’s standards of ethical conduct require that information should be fairly and objectively communicated and that all relevant information should be disclosed. From a management accountant’s standpoint, modifying employee and customer satisfaction ratings to make division performance look good would violate the standard of objectivity. Conley should indicate to Emburey that the employee and customer satisfaction ratings are, indeed, appropriate. If Emburey still insists on reporting better employee and customer satisfaction numbers, Conley should raise the matter with one of Emburey’s superiors. If, after taking all these steps, there is continued pressure to overstate employee and customer satisfaction ratings, Conley should consider resigning from the company and not engage in unethical behaviour. Download 1.72 Mb. Share with your friends:
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