Page 87 - BA1 Integrated Workbook STUDENT 2018

Performance measurement

Problems with performance measures

Setting a performance measurement mix can have a number of problems for an
organisation, since it must consider:

 in divisional companies, assessing performance of each division can be
complex and has to consider:

 goal congruence between divisions

 fairness – the results of one division may depend, in part, on the actions of
another

 whether/how central head office costs should be apportioned

 controllability – managers should only be assessed on things that they directly
control. Failure to consider this will demotivate staff

 sub-optimisation – setting poor performance measures can lead to:

 short termism – where managers try to hit short term measures by
sacrificing long term gains in the business

 wrong signals – excessive pressure to hit targets could lead to pressure
on staff to use ‘creative accounting’ to meet their goals.

Illustrations and further practice

Now review TYU 16 and 17 in Chapter 8 of the text.

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