Divisional structures
In this Advanced Performance Management lesson, you'll explore divisional structures and how organisations use them to delegate responsibility and assess manager performance. You'll learn the four types of responsibility centres—cost, revenue, profit, and investment centres—and understand when each applies.
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In this lesson
- 0:00 Divisional performance management overview
- 2:17 Advantages and disadvantages of decentralisation
- 5:25 Controllable profit and performance accountability
- 7:14 Worked example: calculating divisional profit levels
- 9:04 Return on investment, residual income, and EVA
About this lesson
The lesson covers the advantages of decentralisation, such as improved decision-making through local knowledge and faster strategic response, alongside potential drawbacks like goal misalignment and loss of economies of scale. You'll also discover how to calculate controllable, traceable, and net profit by excluding items outside a manager's control, such as allocated head office costs and depreciation, ensuring fair performance assessment. This foundation prepares you for measuring investment centre performance using return on investment, residual income, and economic value added—key metrics for divisional performance management in APM.
Duration: 9m
Transcript
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