Economic Themes (2009) 47 (4) 8, 113-128
Violeta Domanović, Jasmina Bogićević
Abstract: In order to remain competitive globally, MNCs need to use performance evaluation system which is congruent with the company’s mission, objectives, and strategies. Performance evaluation is the key management control task. It provides measures that can be used to evaluate management performance. Corporate management applies performance evaluation system in order to assess the profitability of current foreign operations, identify areas that need corrective actions, and motivate foreign subsidiary staff. The success of a performance evaluation system is determined by its design as well as the implementation of that system. A great number of studies have shown that no single criterion can be used in evaluating the performance of all foreign subsidiaries. MNCs use a mixture of measures, financial and non-financial in order to evaluate performance. Conducted research indicated that three financial measures used by both the U.S. and U.K. MNCs are profit, return on investment, and comparison of budgeted and actual profit. The most important non-financial measures of performance include market share, relation with host government, quality control and productivity improvement. The successful implementation of a performance evaluation system requires the integration with the overall strategy. Performance evaluation system must include comprehensive measures, fair and achievable measure. It is best to use simple, clear and understandable measures. One of most important aspect in the designing of performance evaluation systems was the introduction of the balanced scorecard. It represents creative mixture of financial and non-financial measures. It provides management guidelines for creating shareholder value. Balanced scorecard focuses on integrated relations among the key elements of a business – vision and strategy and four perspectives, namely financial, customer, internal business process and learning and growth. Corporate management applies performance evaluation system in order to assess the profitability of foreign operations, identify areas that need corrective actions and motivate foreign subsidiary staff. No single criterion can be used in evaluating the performance of all foreign subsidiaries. Multinational companies use a mixture of measures, financial and non-financial in order to evaluate performance. The success of a performance evaluation system is determined by its design as well as the implementation of that system. One of most important aspect in the designing of performance evaluation systems was the introduction of the balanced scorecard. It represents creative mixture of financial and non-financial measures. Accounting plays the most important role in performance evaluation system implementation.
Keywords: performance evaluation; balanced scorecard; multinational companies; accounting information; foreign currency translation
THE ROLE OF ACCOUNTING IN FOREIGN SUBSIDIARY PERFORMANCE EVALUATION
Violeta Domanović, Jasmina Bogićević
Abstract: In order to remain competitive globally, MNCs need to use performance evaluation system which is congruent with the company’s mission, objectives, and strategies. Performance evaluation is the key management control task. It provides measures that can be used to evaluate management performance. Corporate management applies performance evaluation system in order to assess the profitability of current foreign operations, identify areas that need corrective actions, and motivate foreign subsidiary staff. The success of a performance evaluation system is determined by its design as well as the implementation of that system. A great number of studies have shown that no single criterion can be used in evaluating the performance of all foreign subsidiaries. MNCs use a mixture of measures, financial and non-financial in order to evaluate performance. Conducted research indicated that three financial measures used by both the U.S. and U.K. MNCs are profit, return on investment, and comparison of budgeted and actual profit. The most important non-financial measures of performance include market share, relation with host government, quality control and productivity improvement. The successful implementation of a performance evaluation system requires the integration with the overall strategy. Performance evaluation system must include comprehensive measures, fair and achievable measure. It is best to use simple, clear and understandable measures. One of most important aspect in the designing of performance evaluation systems was the introduction of the balanced scorecard. It represents creative mixture of financial and non-financial measures. It provides management guidelines for creating shareholder value. Balanced scorecard focuses on integrated relations among the key elements of a business – vision and strategy and four perspectives, namely financial, customer, internal business process and learning and growth. Corporate management applies performance evaluation system in order to assess the profitability of foreign operations, identify areas that need corrective actions and motivate foreign subsidiary staff. No single criterion can be used in evaluating the performance of all foreign subsidiaries. Multinational companies use a mixture of measures, financial and non-financial in order to evaluate performance. The success of a performance evaluation system is determined by its design as well as the implementation of that system. One of most important aspect in the designing of performance evaluation systems was the introduction of the balanced scorecard. It represents creative mixture of financial and non-financial measures. Accounting plays the most important role in performance evaluation system implementation.
Keywords: performance evaluation; balanced scorecard; multinational companies; accounting information; foreign currency translation
