Features of Service Organizations - Essay Example

Service Organizations Student’s Name: Institutional Affiliation: University: Features of Service Organizations A service organization is a voluntary organization that is non-profit making. The members of a service organization meet on a regular basis to perform charity work. The members can participate by physical involvement that is, hands-on efforts or they may raise money that will be given to other organizations. They can also be referred to as service clubs. The service organizations are defined by their service mission and also the membership benefits. The benefits are such as social occasions, personal growth, networking and all these are done by encouragement of involvement (Hardina, 2007). There is a permanent system and structure of governance that is well set in a service organization. The organization is responsible for the provision of goods and services. It also participates in the provision of counseling to its consumers, which is its primary mission. The organizations vary in size because some are small and lack concrete structure, whereas some are large with many units that offer supervisory structure that is complex (Hardina, 2007). The organizations also differ in reference to those with all-volunteer staff with a handful of the staff being professional to organizations with hundreds of staff that vary in the type of skills they are assigned, level of skills, educational attainment and the authority they command, for example, the rotary (Rotary website, 2011). In the organizations, the consumer is the person who receives services from the organization. The services may be; health, social, or mental health for instance through counseling (Hardina, 2007). The professional type of service organization involves professionals. The staff is well educated on some skills that it offers to the consumer. In this type of service organization, the transaction are few but highly customized as well as process- oriented (Al-Shammari, 2010). The services have an extended contact time where it is not just a give and take affair like in a shop. The consumer has to be booked, for example, in a medical consultant and then professional guidance offered from a central point. There is value added process that occurs in the front office from the point where judgment that is considerable about the customer needs is made. Examples of such service providers who offer services from a professional view are doctors, consultants, architects among others (Al-Shammari, 2010). The distinction between mass services and professional is well established in the features. Classification is based upon six features that are; equipment versus people, the extent in which the employee and customer come into contact, employee level of discretion, customization level, and value added in the front office versus the one offered in the back office and lastly, the process focus versus product (Al-Shammari, 2010). The service organization should have influence on the Emotional Intelligence on the tacit knowledge when it comes to sharing of the tasks in the service organizations. The professional based service organizations are quite different from the mass ones, because, in the professional organization, the employee makes use of the tacit knowledge; the understood knowledge. It cannot be shared so should the employee resign he leaves with it. It can only be shared unlike the knowledge shared in the mass organization that can be picked from the colleagues. When a doctor is rending her services to the consumer, she can only share but cannot show another person how to perform his duty. This is in contrast with mass organization, which uses skill like carpentry (Al-Shammari, 2010). In the mass services, there is the organization of marginalized people who want to get back to their own community and help in reforming the societal expectations. Most of these people do not have formal education, but they have the wealth of skills that they can use to help the members of their community. They participate in activities like facility construction, where they use the hands-on effort as volunteers (Al-Shammari, 2010). They can participate in building of for instance a church, a social hall among others. They can also offer community policing. These are the people in the society that have little powers and are often referred to as marginalized or oppressed. Most of them suffer from institutional discrimination that is influenced by people with authority (Hardina, 2007). Unlike the mass organization, the professionals are well endowed with skills; they have power and at times they offer help to the mass organizations in terms of money they contribute through funds, or the services they offer. The professional grouping is in a position to empower their employees through seminars. Through empowering the staff the organization, gains political goodwill that comes with power, thus hence they are able to advocate for practical changes in the policies implemented by government, giving them a platform to campaign for social change that is meaningful (Hardina, 2007). The mass organization has many transactions, and the contact time is limited. There is still little customization as contrasted to the professional services. Most of the work is done in the back office where the hands-on effort is put into practice. The examples of such mass organization include the bus terminus operations and the fast food organization. In the retail service, there is a firsthand service, and contact with the customer is done for the purpose of informing. In the service organization, the manager should ensure that the employees are empowered so that the organization may grow. When well organized, the service organization graduates to world movements, for instance, the non-governmental organizations have been started as service organizations, but now they overlooks the smaller service organizations (Al-Shammari, 2010). How Accurate Should We Strive To Make Overhead Cost Allocation? The accuracy of overhead cost allocation to a significant level determines how accountancy within the firm is enhanced. To begin with, it is important to understand the relevance of overhead cost allocation. According to Hansen, Mowen and Guan (2007) overhead cost allocation ensures that a company can account for the expenses, other than direct and indirect, for different departments within the organization. Expenses such as electricity, water, insurance, legal services, advertising, depreciation and other utility costs are effectively distributed, such that accounting for departmental expenses is made easier. In order to ensure that a true picture of the financial situation in the various departments is obtained, it is imperative that the company ensures accurate allocation of overhead costs. It is inevitable that we should strive to make overhead cost allocation as accurate as possible. Such accuracy should exceed any reasonable doubt as to whether the costs allocated to each department or product indeed represents what it should allocated. This way, excessive allocation that often results in errors is avoided and, therefore, the overall account process in the company is accurate. This not only promotes the company’s capability of enhancing accountability, but it also ensures that each department pays for what it has rightfully used in the form of overhead costs (Langfield-Smith, Thorne & Hilton, 2009). Accuracy should be ensured in order to provide a definite value of costs incurred by the company, so as to effectively determine the productivity of the department or product. This way, no department, or product is overburdened by inaccurately determined overhead costs. The allocation of overhead costs should be accurate enough to justify the consumption of amenities in each department in the organization (Vanderbeck, 2007). This is because some departments generally use up more of the overhead costs than other departments. The portions allocated to each department should, therefore, represent an approximate of the true cost that is actually incurred in each of the organization’s departments. For example, it would be justifiable to state that the electricity costs incurred in the production department cannot be compared to the costs incurred in the administrative department, mostly due to the operation of heavy machines in the production department (Langfield-Smith, Thorne & Hilton, 2009). This insinuates that during the allocation of overhead costs, the company should place a higher ratio of the overhead costs in the production department, while the administrative department takes a smaller portion. Inaccurate allocation may end up overburdening the administrative department, for instance if the overhead costs are allocated equally. This would, therefore, mean that the company’s account do not represent the true position of the company as far as costs for each department are concerned. Allocation of overhead costs should be so accurate that there is no chance of allocating costs to products that are not associated with them. This usually happens where there is more than one product at the company, yet the different products do not use the same overhead costs. An example is given by University of Nebraska (2011) who note that higher volume products are often allocated more overhead costs than they deserve when direct costs are used in the allocation of costs. When a single cost driver such as the volume of products is used in allocating costs, low volume products often end up underpriced while high volume products are overpriced (Vanderbeck, 2007). This is because the low volume products basically require more specialization and are time consuming. Since the overhead costs are spread throughout the firms’ products however, high volume products that normally require little or no specialization end up sharing costs that are not associated with them; which in turn affects the accuracy of their selling prices. Accuracy during allocation however ensures that products are valued at their rightful value. Accuracy of overhead cost allocation should be such that the total costs of production does not exceed competitors’ costs marginally for similar products. The company should strive to be extremely accurate in the allocation of overheads because they determine the anticipated profitability of the company. According to Vanderbeck (2007), it is possible for a company to allocate more overhead costs to one product than is necessary during the process of allocation. In this respect, the production cost of the product is expected to be high and so will be the selling price. In the event that a competitor allocates the accurate costs to a similar product, chances are that the competitor will be in a position to sell the product at a lower price thus attracting more customers. Accordingly, the company would lose to competitors and thus impact on profitability as a result of inaccurate allocation of overhead costs. This illustrates the importance of accurate allocation of overhead costs. It must, however, be noted that the allocation of overhead costs cannot be entirely accurate because no firm can actually determine how much each department or product line should pay for services and amenities that benefit all departments (Hansen, Mowen and Guan, 2007). What is important, however, is that the method of allocation that the company adopts promises to give an approximate figure which is very close to the actual cost incurred in each department, so as to ensure that the allocation of costs is as accurate as possible. References Al-Shammari, M. (2010). Knowledge Management in Emerging Economies: Social, Organizational and Cultural Implementation. Hershey, Pennsylvania: Idea Group Inc. Hardina, D. (2007). An empowering approach to managing social service organizations. Berlin, Heidelberg: Springer. Hansen, D. R., Mowen, M. M. & Guan, L. (2007). Cost management: accounting & control. London: Cengage Learning. Langfield-Smith, K., Thorne, H. & Hilton, R.W. (2009). Management Accounting: Information for Managing and Creating Value (5th Edition). Australia: McGraw-Hill. Rotary (2011). Running a club. Retrieved June 20, 2011 from http://www.rotary.org/en/Members/RunningAClub/Pages/ridefault.aspx University of Nebraska at Omaha. (2011). Overhead: Allocating your Costs Efficiently. Retrieved June 20, 2011 from ptac.unomaha.edu/newsletter_articles/april06_archive/overhead.pdf Vanderbeck, E. J. (2007). Principles of Cost Accounting. London, UK: Cengage Learning. Uddin, S. & Tsamenyi, M. (2010). Research in Accounting in Emerging Economies, Volume 10. Bradford, West Yorkshire: Emerald. Read More