Question

Chapter 10: Decentralized Performance Evaluation

♣ How do centralized and decentralized companies differ?

♣ What are the advantages and disadvantages of centralization and decentralization?

♣ What are the four (4) Balance Scorecard dimensions/ perspectives?

♣ Identify an example measurement for each dimension/perspective of the balanced scorecard.

♣ What is the purpose, function, and advantages of the balanced scorecard?

♣ Understand how is ROI calculated a. ROI can be separated into what two (2) components?

♣ What is the formula for Residual Income?

Answer 1

2.Uniformity in action: In centralization actions are uniform because of central administrative control.This leads to uniform performance of activities.

3.Flexibility: In centralization there is flexibility and adaptability of the organisation to the changed technology etc.

4.Better Coordination: In centralization all decisions are taken by top level management. So, it facilitates better co-ordination among employees in the various operations.

Disadvantages of Centralization:

1. Delay in work- Centralization delays office works, as quick decisions are not possible in this.
2. Remote Control- Better supervision is not possible as in centralization, all the employees are in the under huge pressure of work.
3. No Loyalty- In centralization, loyalty is not by employees as they doesn't get involved in the process of decision making, it doesn't satisfy employees, and does not get initiative.So,No loyalty is also provided by employees

Advantages of decentralization:

1. Increase in efficiency- In decentralization, employees get more initiatives,more confidence,when they involves in decision making process, which increase the efficiency of employees and performance of the company also.
2. Better Performance- As employees,satisfy and has more confidence in this process, it gives the power of making better performance of company.

Disadvantages of decentralization:

1. More financial burden- In this process, it involves or require employees of fully trained skills to accept authority which involves more financial burden.
2. Uniform Policies not followed- In this process, uniform policies is not possible to follow as different level management,frame policies according to its talent.

ANSWER 3:

MEANING OF BALANCED SCORECARD:

Balanced scorecard refers to the strategic planning and management system which use to measure and monitor progress towards strategic targets and communicate what organisation try to accomplish.

The four perspective of balanced scorecard:

1. Financial- This perspective views organisation performance and the use of its financial resources.
2. Customer- This perspective views organisation performance in respect of organisation customers, stakeholders that the organisation is designed to serve.
3. Internal Process- This perspective views organisational performance through the quality and efficiency related to its product or services or other business process.
4. Organisational Capacity- This perspective views organisation performance in respect of organisation human capital,technology,culture,infrastructure and other capacities that are key to breakthrough performance.

ANSWER 4

There are four perspective of balanced scorecard are as followed :-

1. Financial perspective
2. Customer perspective
3. Internal process
4. Organisational capacity or Learning and growth perspective

Examples of these four perspective of balanced scorecard are :-

1. Financial Perspective- This will include financial performance to evaluate the performance to evaluate the performance. For example- revenue sources,like adding new revenue channels and increasing profit margins etc.
2. Customer Perspective- This will calculate company performance,with the customer and stakeholder's etc. For example- Customer services and satisfaction, as more customers satisfy, more customers will get added and it will increase company performance.
3. Internal Process- In this performance can b calculated with the measure of process taken in the business.For example-Process improvement like improving, internal process and use updated technology for better process.
4. Learning and growth perspective- This perspective will measure performance of company with the respect of human capital,technology etc. For example- In human capital,skills,talent and knowledge afre keys to evaluate performance of organisation.

In technology, safety systems, data protection systems are the keys to measure the performance of company.

ANSWER 5:

The purpose of balanced scorecard is to evaluate company performance by focusing four separate ares i.e financial customers,Internal process and organisation capacity. By focusing on these four separate areas,they evaluate the financial as well as non financial performance of the organisation.

Function of balanced scorecard is to measure and monitor progress towards strategic targets and communicate what they are trying to achieve:

Advantages of Balanced Scorecard:

1. Better performance or management information - In Balanced Scorecard,information of financial and non-financial performance with each and every details.
2. Better Management and Improves Performance Reporting- Organisation having or using balanced scorecard tends to report performance and communicate better than other organisation.
3. Improved Communication-In this balanced scorecard communication of all targets and measurement of all financial and non-financial items,could be better than any other tools.