The basic premise that should underlie the design of a control system for an MNC's subsidiary is that the control objects must be factors over which the subsidiary exerts influence. Once the system has been designed, the exact nature of the control objects-as well as the method and units of measurement and the acceptable level of deviations-must be clearly communicated by the MNC to its subsidiary.
Managers need very specific knowledge of evaluation criteria in order to choose strategies that maximize performance. There are basically two means at their disposal for reducing the uncertainty associated with a specific variable. The first is to prevent variety from arising through better planning of systems and procedures and better selection and acculturation of key personnel. The second is to better detect variety through more accurate and timely data gathering, organization, processing, and evaluation.
Most companies focus on a mixture of financial and nonfinancial control objects. Some companies choose control objects from a set of factors developed by the association to which they belong; others develop their own. General Electric's system for measuring and evaluating profit center performance focuses on the following eight key areas: 1
(1) Profitability
(2) Market position
(3) Productivity
(4) Product leadership
(5) Personnel development
(6) Employee attitudes
(7) Public responsibility
(8) Balance between short-range and long-range goals
Management Foresight, Inc., a consulting company in Columbus, Ohio, suggests that the very specific set of performance factors listed in PERFORMANCE SUMMARY be used to arrive at an overall judgment of management performance and firm value.
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