PERFORMANCE EVALUATION IN A DECENTRALIZED ORGANIZATION: A STUDY OF CFAO NIG. PLC.

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Date
1995-07
Authors
ONWUAGBA, NKEM VINCENT
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Abstract
The overall objective of this study has been to convey the message that organizations use a variety of divisional performance measurement methods, some of which are imperfect while others have some merits. This enquiry demonstrates that one of top management's most challenging jobs is to design and implement consistent divisional measurement tools that will adequately motivate divisional managers to act in the best interests within the purview of the entire corporate entity. Consequently, we were motivated to: (1) Undertake a comparative analysis of methods of appraising the performance of divisions and divisional managers in CFAO NIG. PLC -- a decentralized organization. (2) For this purpose, three key financial performance indicators of Profitability, ROI and Residual Income were selected for analysis. Based on these performance tools, the study seeks: (a) To identify the criteria adopted by CFAO for evaluating her managerial performance. (b) To justify the suitability of the adopted criteria vis-a-vis the criteria widely favoured in the literature. The determination of this suitability will be made in the light of: feasibility; motivation of managers and staff; and the degree of freedom from control by the corporate headquarters. Various dimensions of related matters in the literature were reviewed and the techniques for proper conduct of the research encompasses the administration of questionnaires and the conduct of interviews to solicit for desired information. Statistical instruments were equally employed to comparatively analyse and interpret the assembled data. The major findings and conclusions of the research are: (1) The acceptance of two hypotheses bordering on control and motivation while a third on information flow was outrightly rejected. This shows that CFAO has well established control and corporate reward systems, but lack good communication system which is not in line with modern technology. (2) That determining appropriate choice of performance appraisal and dysfunctional decision making are the greatest problems working against decentralization. Not surprising then that profitability measure was exposed as a subjective and biased measurement criterion, which the management of CFAO equally misconceived and subsequently misapplied in ranking divisions and their managers. (3) That corporate management is yet to embrace the objective and widely accepted measurement techniques of ROI and Residual Income. Probably, it is oblivious of the fact that responsibilities should be delegated basically for profits in relation to the investment base. (4) That management does not give due recognition to non profit measures of performance. The non pursuit of sound personnel development programmes for instance, would definitely ensure that vacuum is always created in the management hierarchy and that corporate resources committed to divisions are not efficiently and effectively managed. (5) That top corporate management grips firmly on power control measures and this no doubt defeats the very essence of decentralization. (6) The accounting system as currently practiced in the organization is not portrayed in good light and these inadequacies are viewed to be below standard for a conglomerate of such magnitude. The principal findings and conclusive remarks on the study are pulled together to serve as basements for our recommendations. They include among others; (1) The discontinued use of profitability measure of managerial performance due to its subjectivity, for the more objective ROI and Residual Income measures. (2) Upgrading the communication and accounting systems in line with modern standards. (3) Embarking on vigorous formal and informal training programmes for management and staff to always ensure the availability of skilled personnel for all levels in the management hierarchy. (4) The concession of more autonomy to subordinate managers for speedy decision making so as to facilitate improved performance and greater profitability.
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PERFORMANCE, EVALUATION, DECENTRALIZED, ORGANIZATION:, STUDY, CFAO NIG. PLC
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