Greg Peterson was recently appointed vice president of operations for Webster Corporation. He has a
manufacturing background and previously served as operations manager of Webster’s tractor division. The business units of Webster Corporation include divisions that manufacture heavy equipment, process food, and provide financial services.
In a recent conversation with Carol Andrews, Webster’s chief financial officer, Greg suggested evaluating unit managers on the basis of the business unit data in Webster’s annual financial report. This report presents revenues, earnings, identifiable assets, and depreciation for each business unit for a five-year period. He believes that evaluating business unit managers by criteria similar to that used to evaluate the company’s top management is appropriate. Carol has reservations about using information from the annual financial report for this purpose and suggested that Greg consider other criteria to use in the evaluation.
1. Explain why the business unit information prepared for public reporting purposes might not be appropriate for the evaluation of unit managers’ performance.
2. Describe the possible motivational impact on Webster Corporation’s unit managers if Greg’s proposal for their evaluation is accepted.
3. Identify and describe several types of information that would be appropriate for Greg Peterson to use when evaluating the performance of unit managers. (CMA Adapted)