Question

Spandocorp is a diversified firm that makes industrial, military and consumer products from spandex. spandocorp manages each of the businesses that it operates in as a separate division and treats each as a true profit-and-loss center. in this organization, grace mckenna is responsible for deciding which set of businesses spandocorp will operate in and for encouraging behavior that is consistent with this strategy, wells tucker provides information to mckenna about the internal and external environments that she uses in her decision making, and kelly rae is one of the individuals who is responsible for evaluating the firm's decision making to ensure that it is consistent with the interests of equity holders. if spandocorp wanted to measure the performance of its divisions with a method that would minimize any potential short-term bias, it should use

Answer 1

The answer is economic value added measure of divisional performance.

Performance appraisals tend to impact bonuses or pay raise that an individual will receive, and thus the best way to measure this would it on a division-level by evaluating the economic value that the division manages to give to the company. This would minimize short-term bias because it would look at the division’s performance for the whole year.