Chapter 22. Managers' Performance and Balanced Scorecard: Evaluation on the Division Level
Divisional reports should describe performance and indicate whether objectives are being accomplished.
A segment is a part or activity of an organization from which a manager derives cost or revenue data. Examples of segments are sales territories, individual stores, service centers, manufacturing plants, sales departments, product lines, geographic areas, and types of customers.
Analysis of segmental performance assists in determining the success or failure of the divisional manager and his division. Performance reports should include industry and competitor comparisons. They also should match cycles of major business lines, activities, and geographic areas.
Performance measures consider the contribution of the division to profit and quantity as well as whether the division meets the overall goals of the company. It is difficult to compare profit of different segments, especially when they are of different sizes or provide different kinds of products or services. Measures of divisional performance for a particular segment should be compared to previous periods, other segments, and predetermined standards.
Profit planning by segments applies to selecting from alternative uses of company resources to accomplish a target profit figure. It requires that the profitability of each segment be measured to see the overall profitability of all feasible combinations or alternatives.
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