Goal setting and performance measures.Managing the tax function in today's complex and changing environment requires more than filing returns and dealing with audits. Tax management must achieve the company's tax savings and compliance objectives in a resource-constrained environment. Managing the tax function is a more sophisticated process, and goal setting and evaluation of professional tax staff are part of this process. The use of consultants and the role of outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. are also part of the equation. In preparing this article, the author surveyed senior tax persons at the Fortune 500 companies in order to learn more about the tax management process. This article summarizes the responses that focus on senior management's view of the tax department, tax department goals and performance measures, evaluation of the senior tax person, and professional tax staff goals and performance measures. A second article focusing on the organization of the tax department, the use of consultants, and the role of outsourcing will be published in a forthcoming issue of The Tax Executive. The author wishes to express his appreciation to those who have helped make this study possible. First, Tax Executives Institute (TEI 1. (communications) TEI - Terminal Endpoint Identifier. 2. (text, project) TEI - Text Encoding Initiative. ) assisted with the mailing list An automated e-mail system on the Internet, which is maintained by subject matter. There are thousands of such lists that reach millions of individuals and businesses. New users generally subscribe by sending an e-mail with the word "subscribe" in it and subsequently receive all new , and TEI Education Fund provided partial funding. TEI's Corporate Tax Management Committee and Institute members provided valuable insights in drafting the questionnaire questionnaire, n a series of questions used to gather information. questionnaire, n a form usually filled out by patients that provides data concerning their dental and general health. . Miami University Miami University, main campus at Oxford, Ohio; coeducational; state supported; chartered 1809, opened 1824. The library has extensive collections in literature and American history, including the William Holmes McGuffey Library and Museum and the Edgar W. -- in particular, the Department of Accountancy -- provided a significant amount of financial support. The author was awarded a department research grant funded by PricewaterhouseCoopers in order to have the release time needed to work on the project. Department secretaries Theresa Hornsby Horns·by , Rogers 1896-1963. American baseball player and manager. Known for his skill as a batter, he attained a batting average of .424 in 1924 and a lifetime average of .358. and Betty Bet´ty n. 1. A short bar used by thieves to wrench doors open. The powerful betty, or the artful picklock. - Arbuthnot. 2. Taylor Taylor, city (1990 pop. 70,811), Wayne co., SE Mich., a suburb of Detroit adjacent to Dearborn; founded 1847 as a township, inc. as a city 1968. A small rural village until World War II, it developed significantly in the second half of the 20th cent. , and a student worker, Chontae Pennyman, assisted with the mailing. Jon JON Jonah JON Jesus of Nazareth JON Job Order Number JON Johnston Island, US, Outlying Islands (Airport Code) Patton Pat·ton , Charley 1881-1934. American blues singer and guitarist who wrote several blues standards, including "Mississippi Boll Weevil Blues," and helped pioneer the Mississippi blues style. provided invaluable assistance with the computer input and programming that resulted in output for analysis. The author's daughter, Anne Anne, British princess Anne (Anne Elizabeth Alice Louise), 1950–, British princess, only daughter of Queen Elizabeth II and Prince Philip, duke of Edinburgh. She was educated at Benenden School. Arlinghaus, also assisted in compiling com·pile tr.v. com·piled, com·pil·ing, com·piles 1. To gather into a single book. 2. To put together or compose from materials gathered from several sources: the data. Methodology Information for the study was obtained through a questionnaire mailed in June June: see month. 1998 to the senior tax person at the 1998 Fortune 500 companies. The first mailing was followed by a second request. There were 148 responses to the first request and 44 responses to the second request. The overall response rate was 38.4 percent. Questionnaires were numbered to facilitate the mailing of second requests. Confidentiality Restrictions on the accessibility and dissemination of information. Confidentiality is one of the six fundamental components of information security (see Parkerian Hexad). of responses was strictly observed ob·serve v. ob·served, ob·serv·ing, ob·serves v.tr. 1. To be or become aware of, especially through careful and directed attention; notice. 2. . To develop a meaningful questionnaire, the author conducted interviews with 11 tax executives at 9 companies. Draft questionnaires were sent to these tax executives and to members of TEI's Corporate Tax Management Committee. The draft was modified mod·i·fy v. mod·i·fied, mod·i·fy·ing, mod·i·fies v.tr. 1. To change in form or character; alter. 2. to reflect their comments. Not all respondents In the context of marketing research, a representative sample drawn from a larger population of people from whom information is collected and used to develop or confirm marketing strategy. answered each question, but most responded to the majority of questions. Comments were also solicited and are reflected in this article. Some of the concerns and remarks of those interviewed in the process of developing the questionnaire are also included. Profile of Respondents Tax executives from a broad cross-section cross section also cross-sec·tion n. 1. a. A section formed by a plane cutting through an object, usually at right angles to an axis. b. A piece so cut or a graphic representation of such a piece. 2. of companies responded to the survey. Respondents by size of company, as measured by revenue, assets, and number of professional tax staff are included in Tables I, II, and IV. Table III shows the number of respondents by industry group that accounts for the greatest volume of the company's sales. The number of respondents by type of tax department organization structure is provided in Table V. Table I Company (Including Subsidiaries) Revenues for Most Recent Fiscal Year
Dollar Amount of Revenue Respondents Percentage
Under $3 billion 11 5.8
$3 billion to $5 billion 61 32.1
$5 to $10 billion 56 29.5
$10 billion to $15 billion 27 14.2
$15 billion to $20 billion 11 5.8
Over $20 billion 24 12.6
190 100.0
Table II Company (Including Subsidiaries) Assets at End of Most Recent Fiscal Year
Dollar Amount of Assets Respondents Percentage
Under $5 billion 67 36.0
$5 to $25 billion 80 43.0
$25 billion to $50 billion 18 9.7
$50 billion to $100 billion 14 7.5
Over $100 billion 7 3.8
186 100.0
Table III Industry Group That Accounts for Greatest Volume of Company Sales
Industry Group Respondents Percentage
Communications 7 3.6
Financial Products and Services 25 13.0
Mfg: Consumer Goods 32 16.7
Mfg: Non-Consumer Goods 30 15.6
Retailing 28 14.6
Services 13 6.8
Transportation 10 5.2
Utility/Energy 20 10.4
Other 27 14.1
192 100.0
Table IV
Tax Professionals Working at Corporate Headquarters
# of Tax Professionals Respondents Percentage
0 to 5 21 10.9
6 to 10 43 22.4
11 to 15 42 21.9
16 to 20 28 14.6
21 to 50 52 27.1
51 to 100 6 3.1
192 100.0
Table V
Tax Department Organization
Organization of Tax Dep't Respondents Percentage
Along functional lines
(compliance, planning, etc.) 20 10.8
By type of tax
(federal, state, provincial, etc.) 47 25.4
Combination of functional
and type of tax 97 52.5
Along similar lines to corporate
organization (industry, division,
subsidiaries, etc.) 10 5.4
Other 11 5.9
185 100.0
Table VI shows the number of respondents by the point at which the tax department becomes involved in the decision-making decision-making, n the process of coming to a conclusion or making a judgment. decision-making, evidence-based, n a type of informal decision-making that combines clinical expertise, patient concerns, and evidence gathered from process. Respondents were asked to indicate on a scale of 1 (idea stage) to 7 (after transaction completed) at what point the tax department generally participates in the decision-making process. Table VI Point at Which Tax Department Becomes Involved in Decision-Making Process
1 = Idea Stage 7 = After Transaction Completed
Decision-Point Respondents Percentage
1 30 15.9
2 60 31.7
3 59 31.2
4 23 12.2
5 11 5.8
6 6 3.2
7 0 0.0
189 100.0
The Senior Tax Person's Perception of Senior Management's View Senior tax persons were asked about their perceptions of senior management's view of the tax department. Such information provides a context for the discussion of goal setting and performance measures. Respondents were asked to indicate which of four statements best describes their perception of senior management's attitude toward the tax department. The statements range from senior management viewing tax as primarily a compliance function to considering the tax department as an integral part of the company's business team. One hundred and ninety tax executives responded to this question. Table VII summarizes the responses. The majority -- 68 percent -- responded that they thought senior management either viewed the tax department as an integral part of the company's business team or, at a minimum, that planning is its primary function.
Table VII
Senior Management's Attitude Toward Tax
Attitude Toward Tax Respondents Percentage
The tax department's primary
function is compliance.
It is a cost center. 14 7.4
Although compliance is a
primary function of the tax
department, planning is
equally important. 46 24.2
The primary function of the
tax department is planning.
Compliance is a necessary,
but secondary function. 50 26.3
The tax department is an integral
part of the company's
business team. It is a profit center
for the company. 80 42.1
190 100.0
Tax executives were also asked to indicate the extent to which they believed senior management agrees or disagrees with six statements about tax management. Not surprisingly, more than 90 percent of respondents agreed or strongly agreed that senior management's attitude towards tax depends largely on the communication and networking abilities of tax personnel to make the results understandable to management. The responses are provided in Table VIII. Table VIII Senior Management's Attitude Toward Tax Depends Largely on the Communication and Networking Abilities of Senior Tax Personnel to Make Results Understandable
Respondents Percentage
Strongly Agree 70 36.7
Agree 103 53.9
Uncertain 9 4.7
Disagree 7 3.7
Strongly Disagree 2 1.0
191 100.0
Tax executives were asked whether senior management is aware of the value that the tax department can bring to the company's business units. More than 82 percent agreed or strongly agreed that senior management recognizes the value added Value Added The enhancement a company gives its product or service before offering the product to customers. Notes: This can either increase the products price or value. by the tax department. Responses are shown in Table IX. Table IX Senior Management Understands the Value the Tax Department Can Bring to the Company's Business Units
Respondents Percentage
Strongly Agree 62 32.5
Agree 96 50.3
Uncertain 21 11.0
Disagree 10 5.2
Strongly Disagree 2 1.0
191 100.0
Comparing the responses in Table VIII to those in Table IX, one might conclude that senior management would be more likely to recognize the value added by the tax department if tax personnel did a better job of explaining how tax adds value. Anecdotal anecdotal /an·ec·do·tal/ (an?ek-do´t'l) based on case histories rather than on controlled clinical trials. anecdotal adjective Unsubstantiated; occurring as single or isolated event. comments suggest, however, that this is easier said than done. Furthermore, other variables affect management's perception of the tax department's ability to add value. Table X shows the responses to the question whether senior management wants tax management to always adopt the interpretation that is most favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. to the company and then rigorously rig·or·ous adj. 1. Characterized by or acting with rigor: a rigorous program to restore physical fitness. 2. Full of rigors; harsh: a rigorous climate. defend it. Almost 59 percent of the tax executives agreed or strongly agreed with this statement. Table X Senior Management Wants Tax Management to Always Adopt the Interpretation Most Favorable to the Company and Then Rigorously Defend It
Respondents Percentage
Strongly Agree 28 14.8
Agree 83 43.9
Uncertain 13 6.9
Disagree 51 27.0
Strongly Disagree 14 7.4
189 100.0
Table XI summarizes the responses to whether senior management believes that tax management is doing a good job when tax authorities and the company can agree on the issues and resolve the tax audit. Approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 61 percent agreed or strongly agreed with the statement. Table XI Senior Management Believes Tax Management Is Doing a Good Job When Tax Authorities and the Company Can Agree on the Issues and Resolve the Tax Audit
Respondents Percentage
Strongly Agree 14 7.4
Agree 102 54.0
Uncertain 20 10.6
Disagree 45 23.8
Strongly Disagree 8 4.2
189 100.0
Almost 36 percent of the tax executives believed senior management would prefer that tax management take a less aggressive position to avoid adverse publicity. The responses to this question are summarized in Table XII. Table XII Senior Management Would Rather Take a Less Aggressive Position to Avoid Adverse Publicity
Respondents Percentage
Strongly Agree 8 4.2
Agree 60 31.6
Uncertain 26 13.7
Disagree 77 40.5
Strongly Disagree 19 10.0
190 100.0
Tables X, XI, and XII raise a number of interesting questions about senior management's philosophy regarding the appropriate level of aggressiveness when taking a position initially and later upon audit. At first glance, one might expect that senior management would want tax management to be highly aggressive. Always adopting the interpretation that is most favorable to the company and then rigorously defending it, however, can have negative consequences for the company. Several respondents suggested that taking an unduly aggressive position could create a credibility gap credibility gap n. 1. Public skepticism about the truth of statements, especially official claims and pronouncements: "The credibility gap [is] and damage long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. relations with the Internal Revenue Service and other tax authorities. Others noted that their companies were quite sensitive about public relations public relations, activities and policies used to create public interest in a person, idea, product, institution, or business establishment. By its nature, public relations is devoted to serving particular interests by presenting them to the public in the most and the corporation's appearance as a "good citizen." Approximately 46 percent of the respondents believed senior management wants tax management to be more involved in influencing tax legislation. Table XIII provides a summary of the responses. Table XIII Senior Management Wants Tax Management More Involved in Influencing Tax Legislation
Respondents Percentage
Strongly Agree 13 6.8
Agree 75 39.3
Uncertain 35 18.3
Disagree 58 30.4
Strongly Disagree 10 5.2
191 100.0
The survey did not include a question asking respondents if they believed their tax departments were already sufficiently involved in monitoring and attempting to influence tax legislation. This would have provided more insight about senior management's view of tax management's role in this area. Tax Department Goals and Performance Measures Respondents were asked if someone external to the tax function participates in setting formal goals for the tax department. Ninety-six of 185 respondents indicated yes. Fifty-six of the 96 reported that the chief financial officer is directly involved in the process. Eleven respondents indicated that the controller participates in goal setting. Six said that it is the treasurer TREASURER. An officer entrusted with the treasures or money either of a private individual, a corporation, a company, or a state. 2. It is his duty to use ordinary diligence in the performance of his office, and to account with those whose money he has. . Another 11 answered that some combination of the chief executive officer, CFO See Chief Financial Officer. , and controller participates in the process. As shown in Table XIV, firms organized along functional lines (compliance, planning, etc.) are less likely to have someone external to the tax function participate in setting goals for the department.
Table XIV
Outside Participation in Goal Setting by Tax Department Organization
% with
Outside
Organization of Tax Dep't Respondents Participation
Along functional lines
(compliance, planning, etc.) 20 35.1
By type of tax
(federal, state, provincial, etc.) 45 51.1
Combination of functional
and type of tax 93 53.8
Along similar lines to
corporate organization (industry,
division, subsidiaries, etc.) 10 70.0
The data suggest that having someone external to the tax function participate in formal goal setting does not mean that tax departments will be involved earlier in the decision-making process. Respondents were asked to indicate on a scale of 1 (idea stage) to 7 (after transaction completed) at what point the tax department generally participates in the decision-making process. As might be expected, there were more participating earlier and fewer getting involved later for those companies where someone external participates in goal setting. There was not, however, a significant difference overall. The mean ranking for those companies where someone external participates is 2.49 compared to 2.68 for those companies where someone external does not participate. Generally, participation in goal setting by external personnel does not appear to be affected significantly by the size of the tax department as measured by number of tax professionals working at corporate headquarters. As shown in Table XV, however, relatively fewer departments with 6 to 10 tax professionals have external parties involved in the goal-setting process.
Table XV
Outside Participation in Goal Setting by Number of Professional
Staff
% with
Number of Tax Professionals Outside
at Headquarters Respondents Participation
0 to 5 20 55.0
6 to 10 42 35.7
11 to 15 42 57.1
16 to 20 25 56.0
21 to 50 50 56.0
51 to 100 6 66.6
Senior tax persons from 88 of the 96 firms commented on the frequency of the goal-setting process. Seventy-seven or 87.5 percent indicated that formal goals are changed annually. Several noted that goals are reviewed and changed as needed as needed prn. See prn order. . The respondents were asked that if someone external to the tax function participates, then what are the principal goals for the tax department? Most cited multiple goals. More responded to this question than those who responded to the question about participation by someone external to the tax department. Table XVI shows the frequency of cited goals. Table XVI Principal Goals for the Tax Department Goal Number Staying within department budget 92 Cash savings on specified projects 90 Quality of tax savings ideas 78 Measurable tax project objectives 77 Lack of surprises 74 Targeted worldwide effective tax rate 70 Minimize audit adjustments 67 Effectively manage use of consultants 64 Contribution to before-tax earnings (non-income tax savings) 57 Targeted effective federal income tax rate 36 Targeted effective state or provincial income tax rate 33 Minimize turnover of tax personnel 27 Minimize time spent by consultants 20 Targeted effective foreign income tax rate 19 Targeted state and local tax as a percent of before-income-tax profit 13 The responses are what one might expect. Staying within the budget for the department is a principal goal for most departments for which formal goals are set. Other frequently cited principal but probably more important goals, are cash savings on specified spec·i·fy tr.v. spec·i·fied, spec·i·fy·ing, spec·i·fies 1. To state explicitly or in detail: specified the amount needed. 2. To include in a specification. 3. projects, quality of tax savings ideas, and measurable tax project objectives. Targeted worldwide effective tax rate, targeted effective federal income tax rate, and targeted state (or provincial Provincial has several meanings and may refer to:
63, lxiii cardinal - being or denoting a numerical quantity but not order; "cardinal numbers" of 115 respondents reported that an audit risk contingency contingency n. an event that might not occur. reserve is factored into the measure. Table XVII Standards for Benchmarking Effective Tax Rates Standard of Comparison Number Company's rate in prior years, peer group, and competitors' rates 37 Company's rate in prior years 26 Company's rate in prior years and peer group rates 17 Company's rate in prior year and competitors' rates 13 Competitors' rates 8 Peer group and competitors' rates 5 Peer group rates 5 Other 4 Respondents were asked which goals are effective measures of tax department performance. Cash savings on specified projects, measurable tax project objectives, minimize In a graphical environment, to hide an application that is currently displayed on screen. For example, in Windows and Mac, the application's window is removed from the screen and represented by an icon on the Windows Taskbar. In the Mac, the icon is placed in the Dock. See Win Minimize windows. audit adjustments, quality of tax saving ideas, and targeted worldwide effective tax rate were the most frequently cited. Table XVIII shows these results. Table XVIII Effective Measures of Tax Department Performance Goal Number Cash savings on specified projects 65 Measurable tax project objectives 51 Minimize audit adjustments 47 Quality of tax savings ideas 46 Targeted worldwide effective tax rate 44 Lack of surprises 36 Contribution to before-tax earnings (non-income tax savings) 35 Staying within department budget 33 Effectively manage use of consultants 21 Targeted effective state or provincial income tax rate 15 Targeted effective federal income tax rate 15 Targeted effective foreign income tax rate 8 Targeted state and local tax as a percent of before-income-tax profit 8 Minimize time spent by consultants 6 Minimize turnover of tax personnel 6 Senior tax persons were asked which of the measures, if any, directly affect their compensation. Twenty-four said that none has a direct effect while 77 responded that one or more directly affect their compensation. A summary of the responses is provided in Table XIX. Table XIX Measures That Directly Affect Senior Tax Person Compensation Goal Number Cash savings on specified projects 47 Staying within department budget 37 Measurable tax project objectives 36 Quality of tax savings ideas 33 Targeted worldwide effective tax rate 32 Lack of surprises 29 Minimize audit adjustments 27 Contr. to before-tax earnings (non-income tax savings) 22 Targeted effective federal income tax rate 12 Effectively manage use of consultants 11 Targeted effective state or provincial income tax rate 8 Targeted effective foreign income tax rate 7 Minimize turnover of tax personnel 6 Minimize time spent by consultants 6 Targeted state and local tax as a percent of before-income-tax profit 3 Tax executives were also asked who has input into the evaluation of the senior tax person at their company. One hundred and eighty-four responded. Forty indicated that only the CFO has input. Two identified the Treasurer. Most of the others responded that it is some combination of two or more individuals. Eighteen responded that both the CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. and the CFO have input. Eight indicated that the CEO, the CFO, and the company's business units have input into the process. Another eight identified the CFO and a tax partner from the company's auditing firm. There were a number of other combinations where two or more have input. Table XX shows which individuals have some input into the evaluation of the senior tax person. Table XX Input Into the Review of the Senior Tax Person Persons With Input Number Chief Financial Officer 169 Company's Business Units 61 Chief Executive Officer 60 Treasurer 60 Tax Partner From Company's Audit Firm 43 Vice President of Legal Affairs 28 Controller 11 Others 32 Others included in the process are the audit committee of the board of directors, peers, professional tax staff, vice president of corporate development, chief accounting officer, corporate secretary, outside tax counsel, and the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. case manager. Professional Tax Staff Goals and Performance Measures Eighty-five of 184 respondents indicated that either the senior tax person or a functional manager, if delegated, establishes a formal work plan for each professional in the tax department. As shown in Table XXI, it appears that firms organized along functional lines or a combination of functional lines and type of tax are more apt to establish formal work plans than those organized by type of tax or along lines similar to the corporate organization.
Table XXI
Formal Work Plan for Professionals by Tax Department Organization
% Who
Organization of Establish
Tax Department Respondents Work Plan
Along functional lines
(compliance, planning, etc.) 20 55.0
By type of tax (federal, state,
provincial, etc.) 46 34.8
Combination of functional
and type of tax 94 55.1
Along similar lines to corporate
organization (industry, division
subsidiaries, etc.) 9 22.2
With the exception of small departments (5 or fewer tax professionals), the size of the department has little influence on whether formal work plans are established. The number of firms with formal work plans by size of tax staff is shown in Table XXII.
Table XXII
Formal Work Plan for Professionals by Number of Professional Staff
% Who
Number of Tax Professionals Establish
at Headquarters Respondents Work Plan
0 to 5 18 27.8
6 to 10 40 47.5
11 to 15 41 48.8
16 to 20 28 53.6
21 to 50 52 46.2
51 to 100 5 40.0
One hundred and thirty-nine of 189 respondents indicated that either the senior tax person or a functional manager, if delegated, sets formal performance goals for each tax department professional. As shown in Table XXIII, firms organized by type of tax are less likely to set formal performance goals than are firms organized in other ways.
Table XXIII
Performance Goals for Professionals by Tax Department Organization
% Who Set
Organization of Performance
Tax Department Goals Respondents Goals
Along functional lines
(compliance, planning, etc.) 20 90.0
By type of tax (federal, state,
provincial, etc.) 47 59.6
Combination of functional
and type of tax 96 77.1
Along similar lines to
corporate organization (industry,
division, subsidiaries, etc.) 10 80.0
With the exception of small departments, the size of the department has relatively little effect on whether formal performance goals are set for tax professionals. The number of firms where formal goals are set by size of tax staff is shown in Table XXIV. Table XXIV Performance Goals for Tax Professionals by Number of Professional Staff
% Who
Number of Tax Professionals Establish
at Headquarters Respondents Goals
0 to 5 19 63.2
6 to 10 42 80.9
11 to 15 42 73.8
16 to 20 28 71.4
21 to 50 52 71.2
51 to 100 6 83.3
As might be expected, the data suggest that tax departments get involved somewhat earlier in the decisionmaking process if formal performance goals are established. The mean ranking for the point at which the tax department gets involved in the decision-making process, on a scale of 1 (idea stage) to 7 (after transaction completed), for those companies setting formal goals is 2.64 compared to 3.06 for the 50 companies that do not set formal goals. The principal performance goals for tax professionals are shown in Table XXV. Most respondents cited multiple goals, most frequently, teamwork (product, software, tool) Teamwork - A SASD tool from Sterling Software, formerly CADRE Technologies, which supports the Shlaer/Mellor Object-Oriented method and the Yourdon-DeMarco, Hatley-Pirbhai, Constantine and Buhr notations. , target dates for return completion, quality of ideas generated, customer (business unit) satisfaction, and cash savings on specified projects. Table XXV Principal Performance Goals for Professional Tax Staff Performance Goal Number Teamwork 111 Target dates for return completion 108 Quality of ideas generated 97 Customer (business unit) satisfaction 96 Cash savings on specified projects 94 IDR response time 66 Reduction in audit-cycle time 64 Accomplishment of budget goals 50 Accuracy of taxable income projections to returns as filed 44 Targeted effective federal income tax rate 38 Targeted effective state or provincial income tax rate 35 Quantity of ideas generated 31 Targeted effective foreign income tax rate 22 Accuracy of taxable income projections to audit results 21 Number of hours per return 20 Other 23 One hundred and twenty-eight identified at least one principal goal as being an effective measure of professional tax staff performance. Those identified are listed in Table XXVI. Table XXVI Effective Measures of Professional Tax Staff Performance: Measure Number Cash savings on specified projects 81 Target dates for return completion 67 Quality of ideas generated 66 Customer (business unit) satisfaction 64 Teamwork 63 IDR response time 41 Reduction in audit-cycle time 39 Accuracy of taxable income projections to returns as filed 25 Accomplishment of budget goals for the tax function 22 Quantity of ideas generated 18 Targeted effective federal income tax rate 17 Targeted effective state or provincial income tax rate 17 Number of hours per return 13 Others 16 One hundred and three respondents identified at least one measure of performance that directly affects compensation. As shown in Table XXVII, cash savings on specified projects, quality of ideas generated, customer (business unit) satisfaction, target dates for return completion, and teamwork were the most frequently cited measures directly affecting compensation. Table XXVII Measures That Directly Affect Professional Tax Staff Compensation Measure Number Cash savings on specified projects 58 Quality of ideas generated 53 Customer (business unit) satisfaction 52 Target dates for return completion 50 Teamwork 48 Reduction in audit-cycle time 29 IDR response time 26 Accomplishment of budget goals for tax function 18 Quantity of ideas generated 15 Targeted effective federal income tax rate 15 Targeted effective state or provincial income tax rate 13 Accuracy of tax income projections to audit results 13 Targeted effective foreign income tax rate 10 Number of hours per return 10 Others 16 Eighty-three respondents identified as most important one or more of the measures tied to compensation. Quality of ideas generated (40), cash savings on specified projects (38), teamwork (33), customer (business unit) satisfaction (24), target dates for return completion (22), and targeted effective income tax rate (12) were most often cited as most important. One hundred and seventy-six of 188 respondents reported that at least some tax professionals are eligible for bonuses. One hundred and two of these respondents indicated that the bonus ties directly, in whole or in part, to success in achieving tax department goals. Fifty-nine Adj. 1. fifty-nine - being nine more than fifty 59, ilx cardinal - being or denoting a numerical quantity but not order; "cardinal numbers" indicated that all tax professionals are eligible for bonuses. Thirty-eight respondents stated managers and above are eligible. Seventeen Seventeen novel of young love. [Am. Lit.: Booth Tarkington Seventeen in Magill I, 882] See : Adolescence indicated that directors and above are eligible. Another 43 described various combinations of tax professionals who are eligible. One hundred and sixty-six Adj. 1. sixty-six - being six more than sixty 66, lxvi cardinal - being or denoting a numerical quantity but not order; "cardinal numbers" respondents indicated that at least some tax professionals participate in stock-option plans. Seventeen indicated that all tax professionals participate in such plans. Thirty-five noted that directors and above participate. Forty-two responded that managers and above participate. Conclusion The survey results show what many companies are doing in setting goals and performance measures for tax departments and tax professionals. Such information should be useful to tax executives as they decide how these processes can be improved upon at their companies. The results do not describe, however, how companies carry out the processes or how the measures are implemented. The author hopes that the information provided by this study will prompt an exchange of ideas among tax executives at different companies and stimulate stimulate /stim·u·late/ (stim´u-lat) to excite functional activity. stim·u·late v. To arouse a body or a responsive structure to increased functional activity. further discussion among tax executives and senior management within companies. The discussion points identified through the survey include the following: * How can tax executives make senior management more aware of the value that the tax department can bring to the company's business units? * What mechanisms are being used to obtain feedback from business units about the extent of their satisfaction with the tax department? How can the tax department obtain greater cooperation and increased rapport The former name of device management software from Wyse Technology, San Jose, CA (www.wyse.com) that is designed to centrally control up to 100,000+ devices, including Wyse thin clients (see Winterm), Palm, PocketPC and other mobile devices. with business units? * How do companies measure quantifiable Quantifiable Can be expressed as a number. The results of quantifiable psychological tests can be translated into numerical values, or scores. Mentioned in: Psychological Tests performance goals such as cash savings on specified projects, target dates for return completion, IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. response time, reduction in audit cycle time, etc.? What mechanisms are used to track or monitor performance in these areas? * How do companies establish and measure more subjective subjective /sub·jec·tive/ (sub-jek´tiv) pertaining to or perceived only by the affected individual; not perceptible to the senses of another person. sub·jec·tive adj. 1. performance goals such as quality of ideas generated, teamwork, lack of surprises, etc.? BARRY Barry, Welsh Barri, town (1991 pop. 45,053) and port, Vale of Glamorgan, S Wales, on the Bristol Channel. Once a major coal-exporting port, its more diversified export products include cement, flour, and steel products. P. ARLINGHAUS is the Deloitte & Touche Professor of Accountancy at Miami University in Oxford, Ohio Oxford is a college town located in the southwestern portion of the U.S. state of Ohio in northwestern Butler County in Oxford Township, originally called the College Township. The population was 21,943 at the 2000 census (approximately 16,000 students are included in this figure). . Prior to joining the faculty at Miami, Professor Arlinghaus taught at Southern Illinois University Southern Illinois University, main campus at Carbondale; state supported; coeducational; est. 1869, opened 1874 as a normal school, renamed 1947. It has a center for archaeological investigation and a fisheries research laboratory. There is also a campus at Edwardsville. and Texas Tech University. His article, "Communicating with the IRS During the Conduct of the Audit," appeared in the March-April 1993 issue of The Tax Executive. |
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