The Choice of Performance Measures Used in Divisionalised Companies: a Survey Study Among the Listed Companies

Abstract

This study sets out principally to identify the factors that guide the choice of performance measures used in divisionalised companies and to establish the empirical association between the performance measures used and organizational characteristics. As a prelude, objectives of divisional performance measurement and the measures used to evaluate divisional performance were also addressed. A structured questionnaire addressed to corporate accounting personnel was used to collect the data necessary for the study. A subset of the questionnaire was used to construct a set of variables for the purpose of establishing the empirical association. It is imperative to note that the issue addressed here is association (rather than causal relationship). To analyze the data both descriptive and non parametric statistics were used. With the aid of a Statistical package (SPSS), Kendall's Tau correlation coefficients were calculated for each pair of variables . The analysis found out that measures of divisional performance used were both financial and non financial although the latter are used to a limited extent. Objectives of divisional performance measurement were found to be for the control of divisional activities and making divisional viability decisions. Controllability of divisional items together with considerations oflong term competitive position were identified as the main factors considered in deciding which performance measures to use.

Empirical associations were located between measures of performance and organizational characteristics. However, the expected associations were not uniformly located among the variables with some sign misspecifications being observed. The association between performance measures used and organizational characteristics cannot therefore be generalized.