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Lecture Cost management: Measuring, monitoring, and motivating performance (3rd edition) – Chapter 18

Chapter 18 - Performance evaluation and compensation. In this chapter students will be able to: Discuss how decision-making responsibility and authority are related to performance evaluation; explain how responsibility centres are used to measure, monitor, and motivate performance; cCalculate return on investment, residual income, and economic value added and explain how each is used to measure, monitor, and motivate performance. | Lecture Cost management Measuring monitoring and motivating performance 3rd edition Chapter 18 COST MANAGEMENT Measuring Monitoring and Motivating Performance Third Canadian Edition ELDENBURG WOLCOTT CHEN COOK Chapter 18 Performance Evaluation and Compensation Learning Objectives LO1 Discuss how decision-making responsibility and authority are related to performance evaluation LO2 Explain how responsibility centres are used to measure monitor and motivate performance LO3 Calculate return on investment residual income and economic value added and explain how each is used to measure monitor and motivate performance LO4 Discuss how compensation is used to motivate performance LO1 Discuss how decision-making responsibility and authority are related to performance evaluation Centralized and Decentralized Organizations When decision making is centralized the right to make or authorize decisions lies within top levels of management. When decision making is decentralized the rights and responsibilities for decision making permeate all levels of the organization. General Versus Specific Knowledge General knowledge such as information about volume of sales or product prices when organizations sell few products is usually easy to transfer from one person to another. Decisions based on general knowledge are likely to be centralized made primarily by the chief executive officer CEO and other top managers. Specific knowledge is detailed information about particular processes customers or products information that is costly to transfer within the organization. Technology and Globalization Technology has enhanced global communications and reduced the costs of business transactions so organizations have become increasingly multinational. When organizations expand to other countries managers within each country are likely to have specific knowledge of cultural and customer preferences. Decisions made at the unit level are likely to be more timely and of higher quality because .