高頓名師解析2013年ACCA考試F5業(yè)績管理知識點2
Divisionalisation in Divisional performance measurement
- Relevant to paper F5
This article will briefly introduce the background of divisions and divisionalisation,
Take Heinz as an example of product divisional structure, a multi-product organisation, each group of products is a division. And each division has its own production, sales, people and finance personnel within the framework of the company.
However, a divisional structure may lead to decentralisation to the divisional managers. the level of divisionalisation depends on how much freedom the divisional managers have. Before consider the decisions made and its performance of a division, it is important to understand the divisionalisation's advantages and disadvantages.
The advantages of divisonalisation are:
l Divisionalisation can improve the quality and time of decisions made because divisional mangers have better knowledge of local market conditions and are able to make more judgements. Moreover, division managers will not miss opportunities or react to local changes slowly due to waiting for the information to be reported to and back from head office. Furthermore, decisions are made by the divisional managers who have the incentive to take decisions in the division's best interests, hence to improve the division's performance.
l Divisionalsation frees up head office management so as the board can focus on the corporational strategic planning rather than the day to day operational involvement.
l Divisions provide managers valuable training grounds by experiencing the managerial skills in a less complex environment in order to persue future top management position.
l In a global organisation, the central head office may not have the management resources or skills to direct operations for each individual division. Thus, the delegation to local operation manager is essential.
The disadvantages of divisionalisation are:
l The most danger of divisionalisation for an organisation is that each division at times acts at their own interests. This is because each divisional managers take decisions in the best interest of their own part of the business, but against the best interest of other divisions and possibly against the interest of the organisation as a whole. In the worst situation, goal congruence can be affected.
l Divisionalisation structure often incurs high management costs due to the duplicated functions in each division. For example, the marketing function can be shared over different divisions.
l Divisionalisation causes barriers within the organisation. for example, the information is prevented sharing between divisions or vertically with central headquarter.
l The head office may lose control since they are not aware of what is going on in the organisation as a whole if the division has too much freedom and power on decision making.
Prepared by Golden ACCA R&D Center
April, 2012
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