Chadd Fisher was recently appointed vice president of operations for Cary Corporation. He has a manufacturing background and previously served as operations manager of Cary's building products division. The business units of Cary Corporation include divisions that manufacture building products, process food, and provide financial services. In a recent conversation with Drew Williams, Cary's chief financial officer, Chadd suggested evaluating unit managers on the basis of the business unit data in Cary's annual financial report. This report presents revenues, earnings, identifiable assets, and depreciation for each business unit for a five-year period. He believes that evaluating business unit managers by criteria similar to that used to evaluate the company's top management is appropriate. Drew has reservations about using information from the annual financial report for this purpose and suggested that Chadd consider other criteria to use in the evaluation.
Required:
1. Explain why the business unit information prepared for public reporting purposes might not be appropriate for the evaluation of unit managers' performance.
2. Describe the possible motivational impact on Cary Corporation's unit managers if Chadd's proposal for their evaluation is accepted.
3. Identify and describe several types of financial information that would be more appropriate for Chadd Fisher to use when evaluating the performance of unit managers.