P2 overview - managing and controlling organisational performance

In this lesson

1. 0:00 Syllabus area C: Management accounting overview
2. 0:55 Responsibility centres and decentralisation explained
3. 2:00 Four types of responsibility centres
4. 3:12 Investment centres and performance metrics
5. 5:09 Big data in management accounting
6. 5:40 Performance measurement and financial ratios
7. 6:50 Balanced scorecard framework
8. 8:47 Transfer pricing fundamentals

About this lesson

The session breaks down decision-making structures, performance measurement techniques, and the practical complexities of managing decentralised businesses, including transfer pricing between divisions. You'll explore how businesses divide into manageable chunks—whether geographically or by product line—and discover the four types of responsibility centres: cost centres, revenue centres, profit centres, and investment centres. For investment centres, you'll learn key performance metrics like return on investment and residual income, and understand how these can sometimes create dysfunctional behaviour that conflicts with overall business goals. The session covers broader performance measurement approaches including financial ratios, the balanced scorecard framework, and benchmarking techniques. The balanced scorecard is particularly important, as it recognises that financial metrics alone don't tell the full story—it balances customer satisfaction, internal processes, and learning and growth alongside financial outcomes. Transfer pricing receives special attention as a challenging but heavily tested topic. You'll see how it works when different divisions trade with each other, and why determining the right transfer price is complex and often contentious, especially when divisions operate across different countries with varying tax rates.

Duration: 11m