By using the return on investment as a divisional performance measure, divisional managers will always be motivated to invest in proposals that will increase the overall return for the company.

Question

Quizplus · Accepted Answer

Using return on investment (ROI) as the sole divisional performance measure can sometimes discourage managers from investing in projects that, while potentially beneficial for the company as a whole, might lower their division's ROI. Managers might avoid investing in projects with returns lower than the division's current ROI even if those investments would be profitable and beneficial for the company overall.

By Using the Return on Investment as a Divisional Performance