MA Training (MAT) is a national organisation which provides private tuition courses in accounting. The courses are generally attended by individuals who work as bookkeepers for other companies and who want to develop their practical skills. None of the attendees is aiming towards any professional qualification or examination. Courses are run on basic bookkeeping, value added tax, payroll, credit control, company administration and basic business management. Other bespoke courses, run on demand, are charged out at higher than normal rates. MAT has six branches nationwide with individual branch managers. Head office is situatedat Nottingham and has responsibility for company accounting, payroll and inventory ordering activities. Individual branch managers have responsibility for all other areas of the business, such as pricing, product mix and staffing. Each branch rents its premises (a national company policy) and staff numbers range from 4 in Newcastle to 18 in Cardiff. Staff are generally former accountants, bankers and tax inspectors who concentrate on keeping courses practical and applicable to their customers. To date managers have always been appraised by return on investment (ROI) with a target return of 40%. Branches have regularly exceeded this target and branch managers seem happy to be appraised in this manner. John Bright, the company's main shareholder and managing director recently visited all branches in order to promote corporate identity and inspect performance at a local level. He returned dismayed at the condition of some branch premises and feels overall that, although recent financial performance has been consistent with previous years, the company does not seem to have changed or developed since he last visited branches five years ago. John believes that he needs to change the appraisal method for branches so that they fitmore closely with what he expects from the company. He wants the business to develop and grow and become the leading provider of business training in the UK. Require: Outline the problems the business is likely to have from its use of ROI as its sole performance indicator.
MA Training (MAT) is a national organisation which provides private tuition courses in accounting. The courses are generally attended by individuals who work as bookkeepers for other companies and who want to develop their practical skills. None of the attendees is aiming towards any professional qualification or examination.
Courses are run on basic bookkeeping, value added tax, payroll, credit control, company administration and basic business management. Other bespoke courses, run on demand, are charged out at higher than normal rates.
MAT has six branches nationwide with individual branch managers. Head office is situatedat Nottingham and has responsibility for company accounting, payroll and inventory ordering activities. Individual branch managers have responsibility for all other areas of the business, such as pricing, product mix and staffing.
Each branch rents its premises (a national company policy) and staff numbers range from 4 in Newcastle to 18 in Cardiff. Staff are generally former accountants, bankers and tax inspectors who concentrate on keeping courses practical and applicable to their customers.
To date managers have always been appraised by
John Bright, the company's main shareholder and managing director recently visited all branches in order to promote corporate identity and inspect performance at a local level. He returned dismayed at the condition of some branch premises and feels overall that, although recent financial performance has been consistent with previous years, the company does not seem to have changed or developed since he last visited branches five years ago.
John believes that he needs to change the appraisal method for branches so that they fitmore closely with what he expects from the company. He wants the business to develop and grow and become the leading provider of business training in the UK.
Require:
Outline the problems the business is likely to have from its use of ROI as its sole performance indicator.
Step by step
Solved in 2 steps
