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Chapter 8

Short and long-term financial

performance

BUT a focus on
Short-term financial short-term financial Therefore, need steps to
performance measures performance can reduce short-termism,
are used for: damage shareholder for example:
wealth, for example:
 control purposes, e.g.  investment in new  use long-term
variance analysis assets is cut measures such as NPV
and IRR
 determining executive  investment in training
rewards and development is cut  use a range of financial
and non-financial
 assessing the quality of
past decisions measures (Chapter 11)
 use VBM (Chapter 9)
 give managers share
options or link bonuses
to long-term
performance
 reduced
decentralisation
 switch from a budget-
constrained style

In rare situations, for example an organisation that is fighting to survive, a focus on
short-term targets would be more appropriate.

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