=+20-33 KK Division managers’ compensation, levers of control (continuation of 20-32)

OBJECTIVES 8, 9 Alma Ameries seeks your advice on revising the existing bonus plan for division managers of Gotcha. Assume division managers do not like bearing risk. Alma Ameries is considering three ideas:

◗ Make each division manager’s compensation depend on division RI.

◗ Make each division manager’s compensation depend on company-wide RI.

◗ Use benchmarking, and compensate division managers on the basis of their division’s RI minus the RI of the other division.

Required 1 Evaluate the three ideas Alma Ameries has put forth using performance evaluation concepts described in this chapter. Indicate the positive and negative features of each proposal.