| dc.description.abstract | In managing a large divisionalised company, information from
the divisions to head office is essential. Such information
includes performance reports conveying the performance of a
division's manager or of a division as an economic entity. This
study set out to survey certain aspects related to performance
measurement in divisionalised companies with headquarters an
Nairobi. The emphasis was on divisional autonomy, performance
measurement objectives ,measures used and problems faced. Data was
collected using a structured questionnaire which was addressed
to the head of accounting department at company's headquarters.
The study found the level of autonomy granted to divisional heads
to be generally low even ln operating policy area. The
consequence was affecting the aspects of performance measurement
covered in the study. 'Divisional performance is measured mainly
for control purpose and provision of information for planning and
strategy formulation but not often for determining remuneration
to division ::f1eads.Though comp~nies do not stick to just
principal m~~~u;e of performarle, meeting targets set in
one
the
budgets is the .m.•ost used measure, with residual income and return
on investment being rarely used. While difficulty in defining and
measuring division's costs and difficulties .in separating a
division for the rest of the firm are the main problems an
measuring divisi-:onal pe rf ormance . difficulty in defining and
measuring divisions revenues and transfer pricing are not
considered as major problems.
(iii)
Despite the consistency between autonomy and the aspects of
performance measurement, the low level of autonomy hinders
effective use of divisionalised structure. It is important that
the divisional heads are granted more autonomy particularly ln
operating policy area. When autonomy is increased, it has to be
borne in mind that the currently used measures need to change
since they may fail to reflect the performance of the division . | en |
