Performance assessment is crucial to management of any companies who wants to make sure that its operation is under control. To be able to go into deeper and more details assessment, they would need to view the company in segments—divided into several unit of operations, in the form of responsibility centers.

Using financial and non-financial control system, each center is assessed to get insight how’s each unit (responsibility center) of the company going, or why plans were not achieved—in a worst case, and make the appropriate adjustment. Based on the result of the assessment, they then are able to take necessary decision for their operation going forward (in short or long-run.)

Financial control summarizes the financial results of operation (in each responsibility center) and compares them to planned results. When companies (or organizations) use a single index to provide a broad assessment of operations, they frequently use a financial number, such as revenue, cost, profit, or return on investment. That is why each responsibility center is called “revenue/cost/profit/investment center”. By dividing the whole operation into business units—in the form of responsibility centers, executives are capable of controlling every facet of the business more effectively. They can even analyze and decide which business units deserve for expansion—or closed in the worst situation. In this post, I am going to discuss about responsibility centers and how to coordinate the center in a light overview. Read on…