Managerial performance

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Managerial performance

Measures that may be used to assess managerial performance and the practical problems involved

The personal performance of the manager is not the same as the overall performance of the responsibility centre he/she manages due to external factors which are outside of the control of the organization. 

Hence measures which reflect the performance of the unit as a whole may not reflect the performance of the manager.

There are two main ways of measuring managerial performance

  1. use measures based on controllable costs and revenue 

    For example, a profit centre manager, measure performance only on the profit that the manager can control, therefore machine depreciation of the whole organisation should not be included

  2. set specific managerial objectives against which performance can be measured at regular intervals.

Investment centres

In investment centres, divisional performance is measured using:

  • return on investment (ROI)

  • residual income (RI)

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