6-33 Responsibility, controllability, and stretch targets. Consider each of the following independent situations for Sunshine Tours,...

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6-33 Responsibility, controllability, and stretch targets. Consider each of the following independent situations for Sunshine Tours, a company owned by David Bartlett that sells motor coach tours to schools and other groups. Sunshine Tours owns a fleet of 10 motor coaches and employs 12 drivers, 1 maintenance technician, 3 sales representatives, and an office manager. Sunshine Tours pays for all fuel and mainte- nance on the coaches. Drivers are paid $0.50 per mile while in transit, plus $15 per hour while idle (time spent waiting while tour groups are visiting their destinations). The maintenance technician and office manager are both full-time salaried employees. The sales representatives work on straight commission. 1. One of the motor coach drivers seems to be reaching his destinations more quickly than any of the other drivers and is reporting longer idle time. 2. Sunshine Tours allows motor coach drivers to select meal stops on long distance trips. Drivers are encouraged to discuss the stop locations with the client's trip contact in advance to ensure that the restaurant meets customer expectations. A recent investigation has shown that one driver only stops at a particular restaurant chain. Customer satisfaction surveys for that driver's trips have shown de- creased satisfaction regarding the meal stops. It is suspected that the driver is receiving kickbacks from the restaurant in return for steering customers to them. 3. Regular preventive maintenance of the motor coaches has been proven to improve fuel efficiency and reduce overall operating costs by averting costly repairs. During busy months, however, it is difficult for the maintenance technician to complete all of the maintenance tasks within his 40-hour workweek. 4. David Bartlett has read about stretch targets, and he believes that a change in the compensation structure of the sales representatives may improve sales. Rather than a straight commission of 10% of sales, he is considering a system where each representative is given a monthly goal of 50 contracts. If the goal is met, the representative is paid a 12% commission. If the goal is not met, the commission falls to 8%. Currently, each sales representative averages 45 contracts per month. 5. Fuel consumption has increased significantly in recent months. David Bartlett is considering ways to promote improved fuel efficiency and reduce harmful emissions using stretch environmental targets, where drivers and the maintenance mechanic would receive a bonus if fuel consumption falls below 90% of budgeted fuel usage per mile driven. For situations 1-3, discuss which employee has responsibility for the related costs and the extent to which costs are controllable and by whom. What are the risks or costs to the company? What can be done to solve the problem or improve the situation? For situations 4 and 5, describe the potential benefits and costs of establishing stretch targets. 6-33 Responsibility, controllability, and stretch targets. Consider each of the following independent situations for Sunshine Tours, a company owned by David Bartlett that sells motor coach tours to schools and other groups. Sunshine Tours owns a fleet of 10 motor coaches and employs 12 drivers, 1 maintenance technician, 3 sales representatives, and an office manager. Sunshine Tours pays for all fuel and mainte- nance on the coaches. Drivers are paid $0.50 per mile while in transit, plus $15 per hour while idle (time spent waiting while tour groups are visiting their destinations). The maintenance technician and office manager are both full-time salaried employees. The sales representatives work on straight commission. 1. One of the motor coach drivers seems to be reaching his destinations more quickly than any of the other drivers and is reporting longer idle time. 2. Sunshine Tours allows motor coach drivers to select meal stops on long distance trips. Drivers are encouraged to discuss the stop locations with the client's trip contact in advance to ensure that the restaurant meets customer expectations. A recent investigation has shown that one driver only stops at a particular restaurant chain. Customer satisfaction surveys for that driver's trips have shown de- creased satisfaction regarding the meal stops. It is suspected that the driver is receiving kickbacks from the restaurant in return for steering customers to them. 3. Regular preventive maintenance of the motor coaches has been proven to improve fuel efficiency and reduce overall operating costs by averting costly repairs. During busy months, however, it is difficult for the maintenance technician to complete all of the maintenance tasks within his 40-hour workweek. 4. David Bartlett has read about stretch targets, and he believes that a change in the compensation structure of the sales representatives may improve sales. Rather than a straight commission of 10% of sales, he is considering a system where each representative is given a monthly goal of 50 contracts. If the goal is met, the representative is paid a 12% commission. If the goal is not met, the commission falls to 8%. Currently, each sales representative averages 45 contracts per month. 5. Fuel consumption has increased significantly in recent months. David Bartlett is considering ways to promote improved fuel efficiency and reduce harmful emissions using stretch environmental targets, where drivers and the maintenance mechanic would receive a bonus if fuel consumption falls below 90% of budgeted fuel usage per mile driven. For situations 1-3, discuss which employee has responsibility for the related costs and the extent to which costs are controllable and by whom. What are the risks or costs to the company? What can be done to solve the problem or improve the situation? For situations 4 and 5, describe the potential benefits and costs of establishing stretch targets.