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Issues of using ROI as performance evaluation tool

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Jennifer Baskiter is president and CEO of Plants& More.com , an Internet company that sells plants
and flowers. The success of her startup Internet company has motivated her to expand and create
two divisions. One division focuses on sales to the general public and the other focuses on
business-to-business sales to hotels, restaurants, and other firms that want plants and flowers for
their businesses. She is considering using return on investment as a means of evaluating her divisions
and their managers. She has hired you as a compensation consultant. What issues or concerns
would you raise regarding the use of ROI for evaluating the divisions and their managers?

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Solution attached. I have answered the question generally using my own words and hence reference not quoted.

E25.6
Jennifer Baskiter is president and CEO of Plants& More.com , an Internet company that sells plants
and flowers. The success of her startup Internet company has motivated her to expand and create
two divisions. One division focuses on sales to the general public and the other focuses on
business-to-business sales to hotels, restaurants, and other firms that want plants and flowers for
their businesses. She is considering using return on investment as a means of evaluating her divisions
and their managers. She has hired you as a compensation consultant. What issues or concerns
would you raise regarding the use of ROI for evaluating the divisions and their managers?

Solution:
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Solution Summary

Jennifer Baskiter is president and CEO of Plants& More.com , an Internet company that sells plants
and flowers. The success of her startup Internet company has motivated her to expand and create
two divisions. One division focuses on sales to the general public and the other focuses on
business-to-business sales to hotels, restaurants, and other firms that want plants and flowers for
their businesses. She is considering using return on investment as a means of evaluating her divisions
and their managers. She has hired you as a compensation consultant. What issues or concerns
would you raise regarding the use of ROI for evaluating the divisions and their managers?

$2.19