In large companies, top management’s concern about any aspect of a business’s performance is usually transmitted to the line managers to whom various operating responsibilites have been delegated. In companies with divisionalized structures (companies organized with units responsible to top management for their own profitability), top managers convey their concern about inadequate corporate ROI by delegating some of the company’s responsibility for ROI performance to particular divisions. In delegating this responsibility, top management sets up the divisions that it chooses for this emphasis as either profit centers or investment centers.
A version of this article appeared in the May 1978 issue of Harvard Business Review.
