Chapter10Student20171.docx - Chapter 10 \u2013 Performance Evaluation Pages 583-590 603-508 10.1 Decentralization Organizations split their operations into

Chapter10Student20171.docx - Chapter 10 – Performance...

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Chapter 10 – Performance Evaluation Pages 583-590, 603-508 10.1 Decentralization Organizations split their operations into different operating segments Top management delegates decision-making responsibility to the segment managers Advantages o Frees top management’s time o Use of expert knowledge o Improves customer relations o Provides training o Improves motivation and retention Disadvantages o Duplication of costs o Potential problems achieving goal congruence ABC Corp. CEO Consumer Goods Division Electronics Division Appliance Division Televisions CD Players DVD Players Production Sales
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Goal congruence – when individual goals are in agreement with organizational goal Performance Evaluation Provide upper management with feedback To be effective, should o Clearly communicate expectations o Provide benchmarks that promote goal congruence and coordination between segments o Motivate segment managers Responsibility Accounting Responsibility Center o part of an organization whose manger is accountable for planning and controlling activities Responsibility Accounting o system for evaluating performance of each responsibility center and its manger. Responsibility Centers Cost center - managers are accountable for costs only production department, human resources department, etc. performance measured by comparing actual costs to budgeted costs Revenue center - managers are accountable primarily for revenues sales territories performance measured by comparing actual revenues to the budget Profit center - managers are accountable for both revenues and costs chain of stores, restaurants, etc. performance measured by comparing actual revenues, expenses, and profits to the budget
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Investment center - managers are responsible for 1) generating revenues, 2) controlling costs, and 3) efficiently managing the division’s assets
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  • responsibility center, Fixed Manufacturing, Pharmaceutical segment,  production department

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