Performance measurement in a divisionalised group of companies : a case study

Abstract

PURPOSE – The purpose of the study is to analyse the performance measurement systems implemented by this divisionalised group of companies. This study also aims to understand how performance measurement systems are adapted to different divisions and to determine the importance of divisionalisation. Additionally, the study intends to investigate the behavioural implications of the performance measurement systems implemented by the group. DESIGN – A qualitative approach was adopted due to the nature of the objectives. Following an analysis of the current literature. Nine semi-structured interviews were held with the different organisational levels within the group. These included individuals at Group Level, Financial Level, Divisional Level, and Lower-Level Management. FINDINGS – This study highlights that the group follows a hybrid organisational approach that emphasises both centralisation and decentralisation. Financial performance is valued over operational aspects, with the Financial Controller leading the division. Divisional differences limit comparability as only similar divisions can be compared. The group identifies sector-specific metrics to strengthen divisional approaches. Responsibility accounting is drilled down at divisional levels, and targets must be met regardless of the division's decision power. The findings also indicate that divisions face constant pressure, and conflicting viewpoints exist on the performance evaluation system in both Hotel divisions. CONCLUSIONS – The study recommends elevating the role of the General Manager alongside the Financial Controller, to address both financial and operational aspects in Hotel divisions. Additionally, it is also suggested to involve the divisional level more in budget preparation to allow for more flexibility. The study also reveals that restructuring the performance evaluation system for the Hotel divisions will increase motivation and comparability. It was also concluded that improving the payment matrix incentivises managers and implementing additional non-financial indicators will benefit the group. VALUE – This study is anticipated to serve as a focal point for other groups operating a divisionalised approach, by providing an overview of how performance measurement can be utilised, and how this can be implemented in their organisational structure.