Limitations of financial control
Financial control systems may encourage short-term actions that are not int the company’s long-term interest. Also, business unit managers may not undertake useful long-term actions to obtain short-term profits. A third problem is that financial measurement can distort communication between a business unit manager and a senior manager. Fourth, tight financial control may motivate managers to manipulate data.
The solutions it o use multiple measures, nonfinancial as well as financial. Nonfinancial measures are referred to as key performance indicators (also called key success factors). This multiple measurements are needed at all levels of the organization.