Comments

  1. avatar says

    @tahiracca, apart from the financial measures above, the divisional managers would be assessed on non financial measures like product quality, innovation, etc. population is not a measure of performance.

  2. avatar says

    I have a question. While comparing the performances of managers in different divisions there may be a scenario where division 1 might me in a better economic position due to for instance high number of consumers and division b in a relatively bad economic position. So how would the managers in both of the divisions be comparable? . Kindly list the possible solutions to this scenario. Also kindly stretch it from divisions to organisations having unrelated magnitude of operations.

    • avatar says

      @tahiracca, I think we have to compare like with like. Therefore it would be unfair to compare the managers in different economic conditions, likewise divisions with unrelated magnitude of operations would mean different sizes of divisions, which makes it difficult to compare. For the difference in the No. of customers for instance, you have to consider why the difference; is it because one division is older than the other? or one manager has better strategies to pull customers. In case of the latter, u can compare but in the former scenario, it would be unfair.

      • avatar says

        @kigwanajohn, So as for beyond budgeting we are supposed to compare managers of different divisions or organisations while they may have demographic issues, like one division might be in a fairly lower populated area and the other in a densely populated one or it could be the level of liking for the product in each of the areas etc.. What might be the possible solution here? Can it be that the performance would be measured with reference to population or liking etc.. Kindly share your views as to make the comparison fair in these sort of situations

      • avatar says

        @tahiracca, performance will be measured on the profitability of the division, using measures like EVA, ROI, RI etc. All these measures depend on capital employed. Looking at the issues like demography, i imagine a sensible investment manager of the group will allocate capital to divisions depending on a number of factors like demography. When this is done, then the divisions will be compared very well.

  3. avatar says

    Hi,
    Thank you for the great lecture, appreciate it. Lecturer has mentioned about the article on Beyong Budgeting by examiner. Can anyone tell me where can I find that. Once again thank you for sharing the knowledge :)

    Cheers

  4. Avatar of saadahmednangiana says

    i have a question beyond budgeting is saying that compare the performance of one manager with the other but my question is that if we shall be comparing the performance like this , then that means that we are comparing performance without standards and how do we know that 1st manager have performed well so to compare the performance of other manager with him?

    • Avatar of johnmoffat says

      The problem with measuring performance by comparing with budget figures is that the budget is based on all sorts of estimates as to the state the economy will be in. For example, if you are measuring the performance of the manager of a division, in preparing the budget you will have made assumptions as to the rate of inflation in the coming year and as to the growth in the country’s economy etc etc..
      If the economy grow much more than you were expecting when you prepared the budget, then the manager will report a higher profit than budgeted, but it does not mean that he has actually done his job any better. (And similarly, if the economy collapses next year then he will report a lower profit, but it is not his fault).
      For that reason, Beyond Budgeting suggests that it would be much better to compare performance with that of similar managers – if one manager does much better than the others then he has done his job well and deserves rewarding for it.
      (The problem of course is making sure that you have similar managers to compare with – I mean managers responsible for the same things.)
      Hope that explains a bit better :-)

      • Avatar of rooman says

        is this concept only applied to comparing performances in fields which are open to public…what about comparing performance of a research department manager of apple computers with??????

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