This course introduces students to modern tools and techniques designed to generate performance measures used for decision-making, management and control purposes. Accounting based performance measures are used for a variety of managerial decisions such as product pricing, and profitability analysis (e.g., activity-based costing for customer lifetime value). This course further illustrates how performance measures are integrated into incentive systems so as to align the objectives of (division) managers with those of the shareholders. Key building blocks of such incentive systems are cost allocations, transfer pricing and compensation schemes. At a time where performance measurement is one of the fastest-growth areas for consulting firms, this course illustrates the strengths and weaknesses of commonly-used performance metrics, e.g., Economic Value Added (EVA), Balanced Scorecard. It serves as an important background for a variety of electives in management and accounting as well as for consulting-related courses.
Concepts taught in this course:
Nahum Melumad was a Columbia Business School faculty member from 1993 to 2014.