Performance measurement in divisionalised organisations : a study in local groups of companies

Abstract

evaluation that are implemented to maintain control over the divisions in groups of companies. The study also aims to analyse the various implications arising from performance measurement, where a number of divisions exist. Design – Due to the nature of the study, a qualitative approach was adopted. Following an analysis of the current literature, seventeen semi-­‐structured interviews were conducted. Fifteen interviews were conducted within groups of companies, at top management level and divisional level, whilst two were conducted with advisors within the Big Four firms. Findings – The findings highlight that the formality of performance measurement systems is still lacking in most cases. The participants mainly rely on their accounting systems to measure performance, therefore increasing the focus on financial measures. Most groups also distinguish between managerial and economic performance of the division, since divisional managers are held responsible only for their area of responsibility, which they can affect. Furthermore, the focus on non-­‐financial measures by top management tends to be trivial, often due to their operational detail. Although a balanced approach may be perceived to exist, the majority of the participants admit that financial measures still prevail. The findings also indicate that it is likely that performance measures are not necessarily tied in to the group’s strategy. Conclusions – The study concludes that organisations should first determine their strategic goals, which would then instigate a system to measure performance. Next, it would be essential for organisations to consider the longer-­‐term benefits of implementing such a system. Additionally, in implementing the system, management should also look out for a number of considerations to secure its inherent motivational factors and maintain a balance between financial and non-­‐financial measures. Value – It is expected that this study can be a reference point for groups of companies that plan on undertaking a more structured approach towards performance measurement.