Strategic planning, risk‐taking and reward systems for managers in multi‐divisional companies ‐ an empirical study

Every year, new development projects are recommended to be undertaken by various divisional management to corporate management in different multi‐divisional companies. The corporate managements in such companies face a challenging task of understanding and approving these projects. Moreover, divisions’ performance in a particular year may depend upon the short‐term outcome of such projects. Divisional managers may avoid undertaking new projects, especially those with low probabilities of success, but with extremely high rewards, if successful. Thus, risk‐taking attitudes among divisional managers may be affected in such companies. This paper examines these issues. The results were compiled after surveying 30 multidivisional companies in various industries. Results highlight the various strategic decisions found being conducted at the head office level vs divisional level of such companies. Most of the companies were found to place moderate to fairly strong emphasis on a division’s past performance while evaluating the division’s current year performance. The results highlight project failure allowance, type of reward systems used, and corresponding risk‐taking attitude among divisional managers in such companies.