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Tools for Business Decision Management Makers_11

Tham khảo tài liệu 'tools for business decision management makers_11', khoa học xã hội, kinh tế chính trị phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | 372 CHAPTER 10 MEASURING PERFORMANCE Activity 10.2 continued the business as a whole. Though such a policy would cut across the autonomy of divisional managers it is important for them to appreciate that they are not operating completely independent units and that divisional managers also have responsibilities towards the business as a whole. The problem of risk avoidance by management is a complex one that may be difficult to deal with in practice. It might be possible however to encourage divisional managers to take on more risk if the rewards offered reflect the higher levels of risk involved. Observation of real life tells us that individuals will often be prepared to take on greater risk provided that they receive compensation in the form of higher rewards. If things start to go wrong it may also be possible for the business through the use of budget variance reports to distinguish between those variances that are outside the control of the divisional manager and those that are within the manager s control. Divisional managers would then be accountable only for the variances within their control. It is not always easy however to obtain unbiased information for preparing budgets from divisional managers when they know that such information will be used to evaluate their performance. Management perks may be controlled by central management by setting out clear rules as to what is acceptable. To some extent observing the behaviour and actions of divisional managers can reveal departures from the rules. Many perks such as luxury cars chauffeurs and large offices are highly visible. Central management should be alert to any signs that divisional managers are rewarding themselves in this way. Duplication of effort in certain areas can be extremely costly. For this reason some businesses prefer particular functions such as administration accounting research and development and marketing to be undertaken by central staff rather than at the divisional level. Again this