個案總覽

The performance measurement system in many decentralized companies actually works against good management. It encourages profit center managers to cover up bad news, take short-term actions that may hurt the real interests of their organizations, and accept responsibility for things over which they have little or no control. The solution is to measure the performance of profit centers and their managers with different yardsticks. Measure profit centers with profit center financial statements that follow traditional accounting systems. To measure the managers, use separate profit budget reports.

Return on investment (ROI), as a measure of division contribution to profits in decentralized companies, is of limited use. ROI is too simple a model for a complex process, especially when different profit objectives and types of fixed assets exist. ROI application problems include: setting proper annual profit objectives, assigning responsibility for deviation, and measuring accounted profit in a short period of time. Increased familiarity with division operations and more realistic profit objectives and time span evaluations are needed. Recentralization is an inappropriate alternative for ROI, and correction of the technical drawbacks and implementation constraints of ROI procedures is necessary pending further improvements for new research.