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THE EFFECT OF COMPENSATION MANAGEMENT IN IMPROVING EMPLOYEES’ PERFORMANCE IN AN ORGANIZATION

ABSTRACT

This project work attempts to evaluate the management accounting techniques used by the manufacturing company (A case study of Cadbury Nigeria, PLC) on decision making process. Lists of traditional and modern management accounting techniques were identified and the extent of their use was evaluated. Some of the techniques evaluated are; make or buy decision, opportunity cost, relevant cost, incremental cost, just-in-time, inventory management, budgeting, standard costing (variance analysis) cost-volume-profit analysis; activity based costing and linear programming. Survey design was employed with the use of a well structured questionnaire. Respondents were selected based on simple random sampling technique. Hundred (100)  Cadbury Plc. were sampled. Two hypotheses were formulated and tested with the use of Chi-Square analysis. The analysis resulted to rejecting both hypotheses and hence accepting the two alternate hypotheses. Based on decisions of the tested hypotheses conclusions were reached that application of management accounting techniques by manufacturing companies influence decision making process and There is significant relationship between the management accounting technique used on organization decision making process and the effective result of the decision made. Recommendations were proffered to Cadbury Nigeria Plc and the entire manufacturing companies.

CHAPTER ONE

INTRODUCTION

1.1      BACKGROUND TO THE STUDY

Management accounting techniques have in no small measure assisted different organizations especially manufacturing companies, in their decision making processes. It is a known fact that techniques change over the time largely because business themselves and the societies that they operate change as well. What was considered as a good management technique year ago may be considered ineffective in making decision in the future. Also, changing external business environment has resulted in further developments in the tools and techniques used for management accounting. Traditional management accounting techniques had certain limitations associated with them, for instance, absorption costing methods have been found to be inappropriate in the modern environment. Similarly, standard costing suitability with respect to its general philosophy and detailed operations has come under severe criticism. It is believed that, traditional management accounting performance measures can produce the wrong type of response. However, the current techniques used by the management in making their decisions such as; make or buy, cost-volume-profit  analysis, just-in-time, inventory management,budgeting,variance analysis, activity based costing, linear programming, relevant cost, incremental cost and opportunity cost are the techniques to be discussed in this write-up.

Decision making may be simply defined as choosing a course of action from among many alternatives. If there are no alternatives, then no decision is required. A basis assumption is that the best decision is the one that involves the most revenue or the list amount of cost. The task of management with the help of management accountant is to find the best alternative. From the descriptive model of the basic features and assumptions of the management accounting perspective of business, it is easy to recognize that decision making is the focal point of management accounting. The concept of decision making is a complex subject with a vast amount of management literature behind it. In management accounting, it is useful to classify decisions as:

·       Strategic and tactical

·       Short-run and long-run

In any organization, whether a decision is good or acceptable depends on the goals and objectives of management. Consequently, a prerequisite to decision making is that management have set the organization’s goals and objectives. For instance, management must decide strategic objectives such as the company’s product line,pricing strategy, quality of product, willingness to assume risk, and profit objective. All these can be efficiently achieved when appropriate technique(s) is applied.

1.2      STATEMENT OF THE PROBLEM

It is more or less easy to notice the usefulness of management accounting techniques in decision making process. Therefore, there arise questions as;

§ Does the management accounting techniques really useful on organization’s profit maximization decision making process?

§  What led to the dependence of the company on the use of techniques considered to be modern?

§  Does application of management accounting techniques in organization decision making improve their performance?

§  Indeed, all the above points would take me into a comprehensive research on the effectiveness of management accounting techniques on decision making process in manufacturing industry (CADBURY NIGERIA PLC). 

1.3      OBJECTIVES OF THE STUDY

The main aim of this study is an attempt to:

· Evaluate the effectiveness of management accounting techniques on organization decision making process.

· Determine how useful the management accounting techniques are to the manufacturing company when making decision.

· Demonstrate by using some variables in calculating how each of these techniques will influence organization decision making process if practically implemented.

· Examine the benefits of using management accounting techniques in organization indecision making.

1.4      RESEARCH QUESTIONS

Research questions are those interrogative statements that arise often from the course of study or alternatively they can be defined as research objectives stated in interrogative form. Research questions are meant to generate possible answers to different aspects of the research problem and they should be clearly stated such that they act as guides in identification, collection and analysis of relevant data. In order to achieve the purpose of this research study, the study will attempt to provide answers to the following research questions in order to arrive at a logical conclusion.

i.  Does using management accounting techniques in making decision have tremendously enhance rapid growth for the company?

ii. Is there any significant relationship between the management accounting technique used on organization decision making process and the effective result of the decision made?

iii. What are the yardsticks or parameters to measure the effectiveness of management accounting techniques used in the organization?

iv. Are there significant challenges attached to the use accounting technique in making their decision?

1.5   STATEMENT OF HYPOTHESES

In order to do justice to this research work, the following hypotheses are formulated to act as guides for my findings.

HYPOTHESIS ONE

Ho: Application of management accounting techniques by manufacturing company does not influence decision making process.

HI: Application of management accounting techniques by manufacturing companies influence decision making process.

HYPOTHESIS TWO

Ho: There is no any significant relationship between the management accounting technique used on organization decision making process and the effective result of the decision made

HI: There is significant relationship between the management accounting technique used on organization decision making process and the effective result of the decision made.

1.7      SIGNIFICANCE OF THE STUDY

The researcher strongly believe that evaluating some of the techniques used by the management of manufacturing company in the decision making process will be beneficial to both the management accountants and manufacturing companies in general.

1.8      SCOPE AND LIMITATION OF THE STUDY

This research will evaluate some of the techniques used by the management of manufacturing company(s) in their decisions making processes.Also,the research intends to study essential problems encountered by industries using management accounting techniques as their decision making tools. The study would be limited to Cadbury Nigeria Plc.This is due to constraints like degree of precision, cost and time involve. As a result of this, I will limit myself to data collected (brief history) at Cadbury Nigeria Plc, primary and secondary data.

1.9      ORGANISATION OF THE STUDY

This study will be divided into three chapters. Chapter one, which is the introduction will include the problem statement where the problems of the study that prompted the researcher will be stated. Objectives intended to be achieved in carrying out this research work will also be listed here; the research questions will also be specified in the chapter. Answers to these questions will be provided at the end of the research work. Other sections of the chapter will include; Scope and limitations of the study, significance of the study, definition of terms and finally historical background of the study. Chapter two, which is the literature review examine the existing literatures on management accounting techniques. The chapter will include history, definitions, theories and concepts in accounting. Chapter three, this section includes; the research design, population of study, method of data collection and method of data analysis. Chapter four is the presentation of data analysis. It includes the presentation of data, analysis and testing the hypothesis. Chapter five, is the summary, conclusion and recommendation. This will be the final chapter and will summarize the findings of the research, drawn conclusions from these findings and proffer recommendations to staff and management of organizations in Nigeria.

1.10    DEFINITION OF TERMS

This study intends to examine various concepts used in research work in order to make them understandable to those who are not in this filed (Accounting/Finance)

JUST-IN-TIME: This is a technique whereby production only takes place when there is actual customer demand for the product.

RELEVANT COST: According to chartered institute of management “relevant costs are the cost appropriate to a specific management decision”

OPPORTUNITY COST: An opportunity cost is a level of profit forgone by the pursuit of a particular course of action.

MARGINAL COSTING: This is also known as direct costing or variable costing. It is a system of segregating manufacturing costs between fixed and variable components, and charging the product manufactured only with variable manufacturing costs. It comprises direct material costs, direct labour cost and direct expenses (i.e. Prime cost) and variable manufacturing overheads.

ACTIVITY BASED COSTING: This is a costing techniques that identifies activities in an organization and assigns the cost of each activity resource to all products and services according to the actual consumption by each. It assigns more direct costs overhead)into direct costs.

TECHNIQUE: A practical method, skill, or art applied to a particular task. It can be defined as procedure used to accomplish a specific activity or task.

PROCESS: This is a sequence of independent and linked procedures which, at every stage, consumer one or more resource (employee, energy, machines, money) to convert inputs (data, materials, parts etc.)into outputs. These outputs then serve as inputs for next until a known goal or end result is reached.

MANUFACTURING: Any industry that makes products from raw materials by the use of manual labour or machines and that is usually carried out systematically with a division of labour.In a more limited sense; manufacturing is the fabrication or assembly of components into finished products on a fairly large scale. Among the most important manufacturing industries are those that produce aircraft, automobiles, chemicals, clothing, computers, electrical equipment, furniture, heavy machinery, refinery petroleum products, ships, steel and tools.

DECISION: Decision-making is not a separate function of management. In fact, decision-making is intertwined with the other functions, such as planning, coordinating, and controlling. These functions all require that decisions be made. For example, at the outset, management must make a critical decision as to which of several strategies would be followed. Such a decision is often called a strategic decision because of its long-term impact on the organization. Also; managers must make scores of lesser decisions, tactical and operational, all of which are important to the organization’s well-being.

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