Return on Investment and Economic Value Added as Performance measures in an Organisation
Return on Investment and Economic Value Added as Performance measures in an Organisation.
Introduction
Performance measurement in an organisation is a fundamental requirement by management, investors and other stakeholders. This ultimately guides stakeholders to make appropriate decisions based on information available to them to determine what the organisation wants to achieve and how the performance will be measured. Organisations that are large in structure and operations focus has been to ensure shareholders wealth are maximised which means management, investors and other stakeholders require to know the performance of the organisation as this will aid them to make appropriate.
We will consider the measures put in place both financial and non financial that will enable handlers of organisation to have a good evaluation of the performance of the business.
1 Organisational Structures
According to Tudor Spencer (2005) who stated that
‘‘No two organisations are financially managed in an identical way. This is because different organisations have different purpose, operate in different environments, have different histories or just managed by unique personalities with different preferences’’ (Tudor Spencer 2005; pg 130).
Large organisations are grouped into divisional and non-divisional organisational structures. In divisionalized organisation the structure causes a decentralization of decision making process as the central head office creates different divisions managed by divisional managers. This is the opposite in non divisional organisation as responsibility for profit lies with the central head office.
The divisional manages are given autonomy to determine profit responsibility which falls into an investment, profit or cost centre. Investment centre
Investment centres are basically decentralised divisions that a manager of an organisation has control and maximum discretion. The manager will determine the level and type of capital investment
Introduction
Performance measurement in an organisation is a fundamental requirement by management, investors and other stakeholders. This ultimately guides stakeholders to make appropriate decisions based on information available to them to determine what the organisation wants to achieve and how the performance will be measured. Organisations that are large in structure and operations focus has been to ensure shareholders wealth are maximised which means management, investors and other stakeholders require to know the performance of the organisation as this will aid them to make appropriate.
We will consider the measures put in place both financial and non financial that will enable handlers of organisation to have a good evaluation of the performance of the business.
1 Organisational Structures
According to Tudor Spencer (2005) who stated that
‘‘No two organisations are financially managed in an identical way. This is because different organisations have different purpose, operate in different environments, have different histories or just managed by unique personalities with different preferences’’ (Tudor Spencer 2005; pg 130).
Large organisations are grouped into divisional and non-divisional organisational structures. In divisionalized organisation the structure causes a decentralization of decision making process as the central head office creates different divisions managed by divisional managers. This is the opposite in non divisional organisation as responsibility for profit lies with the central head office.
The divisional manages are given autonomy to determine profit responsibility which falls into an investment, profit or cost centre. Investment centre
Investment centres are basically decentralised divisions that a manager of an organisation has control and maximum discretion. The manager will determine the level and type of capital investment
Bibliography: Shim J K, Siegel J G, Dauber N A, (2008), 2008-2009 Edition, Corporate Hand book of Financial Management, CCH Incorporated, Pg 9 - 639 Kaplan R & Norton D, (1992), The balanced scorecard - Measures that drive performance, Harvard Business Review, 71-79.