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 on investment 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 profitable and beneficial to the company as a whole, might result in a lower divisional ROI compared to existing projects or the division's current ROI. This can lead to underinvestment in projects that are beneficial but do not meet the division's ROI threshold.

By Using the Return on Investment as a Divisional Performance