Topic 5: Performance evaluation

Question 1

Feedback loop

Answer 1

1. plan, target or budget
2. operations
3. measure outputs
4. feedback of information
5. compare actual results with plans
6. control action

Question 2

Features of effective feedback

Answer 2

• exception principle
• controllable costs and revenues should be seperately identified
• regular reporting
• concise and sufficiently accurate

Question 3

advantages of decentralisation

Answer 3

• senior managers can devote more time to strategic issues
• quality of decisions may improve
• increased responsibility should motivate managers
• decisions can be taken faster

Question 4

disadvantages of decentralisation

Answer 4

• lack of goal congruence- self interested segments
• senior managers are less involved with day to day activies so the link between top and bottom of the organisation is weaker

Question 5

ROI

Answer 5

(Controllable divisional profit/ divisional capital employed) x 100%

profit should be before interest and tax

Question 6

RI

Answer 6

Controllable profit - imputed interest charge on controllable investment

Question 7

Balanced scorecard

Answer 7

1. Financial perspective
2. internal business perspective
3. innvoation and learning perspective
4. customer perspective