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Assessing the Performance of Business Unit Managers
Author(s) -
BOUWENS JAN,
VAN LENT LAURENCE
Publication year - 2007
Publication title -
journal of accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 6.767
H-Index - 141
eISSN - 1475-679X
pISSN - 0021-8456
DOI - 10.1111/j.1475-679x.2007.00251.x
Subject(s) - interdependence , strategic business unit , incentive , sample (material) , business , revenue , accounting , unit (ring theory) , performance measurement , actuarial science , marketing , economics , microeconomics , chemistry , mathematics education , mathematics , chromatography , political science , law
Using a sample of 140 managers, we investigate the use of various performance metrics in determining the periodic assessment, bonus decisions, and career paths of business unit managers. We show that the weight on accounting return measures is associated with the authority of these managers, and we document that both disaggregated measures (expenses and revenues), and nonfinancial measures play a greater role as interdependencies between business units increase. The results suggest separate and distinct roles for different types of performance measures. Accounting return measures are used to create the proper incentives for managers with greater authority, while disaggregated and nonfinancial measures are employed in response to interdependencies.