Compare and contrast roi and residual income

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Reference no: EM131486086

In a decentralized organization, poor performance measurements often lead to goal in congruence and failure to meet overall corporate strategy with over investment or under investment by investment centers.

In relation to the above, compare and contrast ROI and Residual Income as performance measurements in a decentralized organization.

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The major issue with such statements is the difficulty in deciding what is controllable or traceable. When assessing the performance of a manager we should only consider costs and revenues under the control of that manager, and hence judge the manager on controllable profit. In assessing the success of the division, our focus should be on costs and revenues that are traceable to the division and hence judge the division on traceable profit.

Reference no: EM131486086

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