13E - Horngren'S Financial And Managerial Accounting

Question

Well-designed performance evaluation systems accomplish many goals. Describe the potential benefits performance evaluation systems offer.

Step-by-Step Solution

Answer

The performance evaluation system helps the management in goal congruence and coordination, effective communication, motivates segment managers and setting standards.

Definition of the Performance Evaluation system

The performance evaluation system is defined as the guide which helps the management of the organization to control their business effectively.

Type of Responsibility center

The potential benefits of a performance evaluation system in an organization are as follows:

1. It helps in the promotion of goal congruence and coordination
2. Performance evaluation system contributes toward the effective communication in the company
3. It also motivates the segment managers of a company in order to attain their targets which are set by the management
4. It helps in setting up standards to determine the competitive positions of the organization.