How to Measure Individual Managers Performance Essay

3120 Words 13 Pages
Table of Contents

1.0 EXECUTIVE SUMMARY 1
2.0 INTRODUCTION 2
3.0 PERFORMANCE MEASURES 3
3.1 Performance measures for Cost Centre Management 3
3.2 Performance measures for Profit Centre Management 3
3.3 Performance measures for Investment Centre Management 4
4.0 CONCLUSION 5
5.0 COSTING SYSTEMS 6
5.1 Marginal/ Variable Costing 6
5.2 Full or Absorption costing 7
5.3 Activity Based Costing 8
6.0 REFERENCES 10

1.0 EXECUTIVE SUMMARY

As Financial Director for a large multinational company operating its business in 20 countries around the world the task of assessing different ways to measure the performance of individual manager who each has responsibly for one part of the portfolio was assigned. To do this an audit was carried out
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Three types of management centres were presented for the Finance Director to review and make a recommendation they were as follow:
• Cost Centre Management
• Profit Centre Management
• Investment Centre Management
The Finance Director looked at the performance measures used for each centre, their benefits and limitations.
There is no single way of measuring performance that will suit all organisations’ needs and circumstances. The organisational and environmental settings within which the performance measurement system is to be applied must be considered carefully. (Coombs, H., Hobbs, D. & Jenkins, E. 2005)
The type of responsibility center being evaluated affects the performance measure(s) used because managers should be evaluated using only performance measures relating to their authority and responsibility (Performance measurement, balance scorecard, and performance rewards)

Performance measurement can be financial or non-financial. Financial performance measurement allows managers to identify areas that are most profitable, using techniques such as Net Income, ROI, Residual Income, Ratios. While non-financial would include employee attitudes, performance appraisals, and balance scorecards which are performance drivers (Keith, L. 1980), other non-financial measures are measures such as product quality

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