Case 5

Case 5
University of Southern California: Responsibility Center Management System
Several faculty groups at the University of Southern California (USC) criticized the Earnings Center
Management System in 1991. (RCMS). The RCMS system is an important component of USC's
decentralized financial control system. This allows university administration to hold the heads of each
partner unit responsible for the financial consequences of their decisions. Prior to RCMS, decision-
making authority was centralized, with senior managers playing an important role in all major resource
allocation decisions. However, the previous system of financial accountability for unit heads was
ineffective.
There are 9 Management Principles & Responsibility Centre Management System
1. Authority and responsibility should be equal in all respects. It is appropriate for RCMS to have
more duties and resources. The development of revenue centers and administrative centers
should be given more authority and guidance to the core organizational units, which are likely
to be education and campus services.
2. The degree of decentralization should correspond to the organization's size and complexity.
It is questionable whether the RCMS-Indirect Cost Association system properly distributes the
power (resources) of each responsibility center considering local circumstances. Over time, as
cost pools and billing bases multiply, billing complexity rises.
3. Decisions some are locally optimal and some are not globally optimal; to implement company-
wide (global) priorities, central levers are required. distributing resources evenly among
various centers of responsibility, utilizing the entire university rather than just one center.
relates to the RCMS — the Participation and Subsidy System. The University receives funding
from each responsibility center on average. This funding is given out by the University to
various centers as a subsidy to pay their academic merit-based fees. Even out the university's
cost variations.
4. Outcome measurement outperforms process control. Outcome control is used in central
banking systems. Banks provide free money for all sources of income. Surplus - interest
income; deficit - interest paid on loans Incentives for center managers to generate surplus,
affecting the operation of each revenue center.
5. Accountability is only as good as the tools that are used to assess it. Accountability will be the
primary focus of measurement tools. Measurement tools will be used to hold people
accountable. Instruments for measuring performance can be functions, ratios, or procedures.
6. Quantitative performance measures tend to crowd out qualitative measures. Qualitative
indicators take precedence over quantitative indicators. This method prioritizes quality over
quantity and efficiency.
7. Work should have plans that pay off, and plans that fail should be sanctioned. The results will
be used to evaluate performance. The outcomes will be critical in determining performance
and motivation.
8. Resource expansion incentives are preferable to resource sharing incentives. Instead of
allocating current Resources, the resource development method Expand Priority expands
other resources.
9. When the rules are their own, players perform better. purpose of the RCMS. The regulations
for division outcomes are more intricate. Players feel more motivated and self-assured when
they are aware of the rules. Rules can vary depending on the circumstances.
In order to achieve a decentralized management system within the university, the new RCMS system
had to include three crucial components. Universities must first develop into hubs of responsibility. A
financial center and an administrative center make up the university. A revenue center is a separate
distributed organization, whereas an administrative center is a body that supports a revenue center
but does not produce its own revenue. Second, revenue and expenses must be tracked or attributable
to key operating units for performance reporting to be effective. To facilitate control of each
responsibility center's operations, USC generates many reports. Third, it must be clear to what extent
business units are given decision-making authority. Bank Intercenter is a further significant
component of RCMS. The bank permits revenue centers to transfer an unlimited amount of money
between fiscal years. Both revenue centers reporting surpluses and those reporting losses use
intercenter banks.V

Case 5 - 232019504

Uploaded by

Copyright:

Available Formats

Case 5 - 232019504

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Case 5 - 232019504

Uploaded by

Copyright:

Available Formats

University of Southern California: Responsibility Center Management System

There are 9 Management Principles & Responsibility Centre Management System

You might also like

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.