1. Ali owns two full-service dry cleaning outlets in the Kajang district. One of the outlets generates over RM800,000 revenue per year and has more than RM1 million investment in state-of-the-art equipment. The other outlet is older, generates RM20,000 revenue per month, and has a 20-25 year-old equipment currently worth RM85,000. Both outlets are profitable with growing market bases. Managers at each outlet are currently paid a base salary and receive a year-end bonus which is five percent of total profits produced by both outlets combined. Ali has just attended a workshop on strategic business unit evaluation where he learned about return on investment (ROI) and economic value added (EVA) methods. He plans to change the current evaluation and reward structure, hoping to motivate the two managers to produce greater revenue and profit.

Required:

Discuss the type of evaluation mechanisms which Ali should propose for the two managers. 

2. According to Kohn (1993), incentive plan in an organisation may fail. Why?