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Answer A:
The shortcomings or possible inconsistencies of using return on investment (ROI) as the sole criterion to evaluate divisional management performance include the following:
 ROI tends to emphasize short-run performance at the possible expense of long-run profitability.
 ROI is not consistent with cash flow models used for capital expenditure analysis.
 ROI frequently is not controllable by the division manager because many components included in the computation are committed in amount or are the responsibility of others.
 Reliance on ROI as the only measurement indicator could lead to an inaccurate decision or investment at either the divisional or corporate level.
Answer B:
The advantages of using a multiple criteria to evaluate divisional management performance include the following.
 Multiple performance measures provide a more comprehensive picture of performance by considering a wider range of responsibilities.
 Multiple performance measures emphasize both the short-term and long-term results thereby emphasizing the total performance of the division.
 Multiple performance measures may highlight non-quantitative as well as quantitative-oriented aspects.
 Multiple performance criteria will enhance goal congruence and reduce the importance of the dysfunctional short-run goal of profit maximization.
Answer C:
The problems or disadvantages of implementing a multiple performance criteria measurement system include the following.
 The measurement criteria are not all equally quantifiable.
 Management may have difficulty applying the criteria on a consistent basis, some criteria may be subjectively more heavily weighted than other criteria, and some criteria may be in conflict with each other.
 A multiple performance measurement system may be confusing to division management.
 Over-emphasis on multiple evaluation criteria may lead to diffusion of effort and the failure to perform as well as expected in any one area.