PERFORMANCE ASSESSMENT AND INVESTMENT DECISIONS OF SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA

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PERFORMANCE ASSESSMENT AND INVESTMENT DECISIONS OF SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND TO THE STUDY

Researchers all over the world has advocated the need for manager or consultant to constantly examines and evaluates an employee’s work behavior and productivity by comparing it with preset standards, document the results of the comparison, and use the results to provide feedback to the employee to show where improvements are needed and why (Miles, 2002). This therefore enables managers to know the areas to invest in for optimal performance.

Performance assessment is employed to determine who needs what training, and who will be promoted, demoted, retained, or fired. It also determines which section of the organization needs maintenance and upgrading. Investment decisions involve the thought process of selecting a logical choice from the available options.When trying to make a good decision, the decision maker must weigh the positives and negatives of each option, and consider all the alternatives. For effective decision making, a person must be able to forecast the outcome of each option as well, and based on all these items, determine which option is the best for that particular situation most importantly the previous performance will be a proper guide in the choice of where to invest (Child, 2002).

Dean and Sharfman (2006) observe, the following two assumptions must hold to prove a link between investment decision process and performance assessment.  Firstly, it must be assumed that investment decision processes are related to choices determine by previous achievements; or, more specifically, that the investment decision process was influencedby the quest for better performance and productivity.  Although this assumption appears intuitively obvious, many academics have argued that the operating environment shapes organizational and individual choices (for example, Aldrich, 2009; Pfeffer and Salancik, 2008).  Others, however, claim that despite the existence of these external factors, managers retain a substantial degree of control over choices (for example, Miles, 2002; Child, 2002).  One argument made in favour of this position by Dean and Sharfman (2006) is that some managers make very poor choices with devastating consequences for their firms, while others in very similar circumstances make much better choices (for example, Bourgeois, 2004).  Such variation, the authors assert, could not exist if performance assessment has been the driving force for such investment decisions.  Hence, Dean and Sharfman (2006) conclude that it appears likely that viable outcomes are a product of the decision process used.  Leading on from this, the second assumption is that choices relate to outcomes, and that all outcomes are not equally good.  Once again there can be very little doubt that external forces also influence decision effectiveness (Hitt and Tyler, 2001; Pfeffer and Salancik, 2008).

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PERFORMANCE ASSESSMENT AND INVESTMENT DECISIONS OF SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA

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