Abstract
Businesses have become more and more widespread and diverse and, thus tend to apply strategies i.e. decentralization to improve the performance while securing long term growth. The main objective of this study is to provide with a comparative analysis of divisional vs. managerial performance evaluation (PE) practices of listed companies in Sri Lanka, focusing on common measures and owned KPIs, and allied purposes. This study applies Mixed Method Research (MMR) approach. Data were gathered through a questionnaire survey and discussions with financial executives of 42 listed companies representing five industry sectors. Facilitating with SPSS software, quantitative data were analyzed using frequency tables and Fisher’s exact test, and thematic analysis and content analysis were applied for qualitative data.The findings reveal that almost all companies evaluate both divisional and managerial performance to achieve multiple purposes, agreeing to controllability principle and mostly compared with budgeted outcome showing its soundness and popularity in this function. Determining separate units/ divisions for PE largely depends on specific situations, nature of businesses, operations and markets dealt with (i.e. Plantation sector), and attitudes of management. With regard to the importance of measures surveyed, no differences appear between divisional and managerial PE, and more concern goes to measures that reflect divisional contribution like sales volume, divisional net profit before taxes and contribution margin than EVA, ROI, and ROS. Given that the deficits of common measures, it suggests establishing owned KPIs for individual companies and modifying them as and when required to evaluate real performance effectively. Better performance would follow if this was complemented by rewards or penalties. The findings add to the understanding on the appropriateness of bases used for creating divisions and of applying common measures and owned KPIs for PE function of different companies /industry sectors and also on complications faced with specific business/industry settings on the above concern. It also provides motivations for employees particularly for divisional managers to achieve higher performance with job satisfaction and rewards, and hence uplifting living conditions and social status too. Overall, the findings would help organizations in both developing and developed economies to establish and improve PE systems to their divisions/ branches towards achieving intended purposes successfully.
Highlights
Businesses have become more and more widespread and diverse and applied strategies i.e. decentralization for enhancing the performance securing long term growth. Laosirihongthong, Adebanjo, Samaranayake, Subramanian, and Boon-itt (2018) stressed that in today’s business environment which is characterized by increasing globalization, intense competition and customer sophistication, organizations continue to change their global business operations to improve overall performance
Three companies – two from F & B sector and one from DVS sector consider other measures): In F & B sector, a company manufacturing beverages evaluates performance based on processes i.e. brewaring, packing, quality assurance, using their own key performance indicators (KPIs) set for each process; and another one having branches Island wide and signifying outlets as ‘supermarkets’ evaluates performance branch wise; and in the DVS sector, a garment does Performance evaluation (PE) only for the entire company as a whole based on the achievement of budget targets if they could exceed such targets in a certain period, everyone in the company receives bonuses
In the whole PLT sector, companies evaluate performance at estate level located in different geographical areas, by comparing performance between estates/ managers assigned to those estates
Summary
Businesses have become more and more widespread and diverse and applied strategies i.e. decentralization for enhancing the performance securing long term growth. Laosirihongthong, Adebanjo, Samaranayake, Subramanian, and Boon-itt (2018) stressed that in today’s business environment which is characterized by increasing globalization, intense competition and customer sophistication, organizations continue to change their global business operations to improve overall performance. Businesses have become more and more widespread and diverse and applied strategies i.e. decentralization for enhancing the performance securing long term growth. Laosirihongthong, Adebanjo, Samaranayake, Subramanian, and Boon-itt (2018) stressed that in today’s business environment which is characterized by increasing globalization, intense competition and customer sophistication, organizations continue to change their global business operations to improve overall performance. Performance evaluation (PE) is important for every profit-making organization that can be employed as a means of ascertaining whether the businesses achieve the expected results during a specified time period. PE is a tool for appraising how well an organization has performed. Divisional managers’ performance towards achieving company goals as a whole (Drury, 2012). Staniskis and Stasiskiene (2006) suggested the necessity of having accurate measurement to ascertain problems and possible improvements in a company’s performance Divisional managers’ performance towards achieving company goals as a whole (Drury, 2012). Staniskis and Stasiskiene (2006) suggested the necessity of having accurate measurement to ascertain problems and possible improvements in a company’s performance
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