BeifangChuangYe Vehicle Group

Case Summary:

The case describes a simple, but real, example of an uncontrollable factor affecting a company's results. The effects of the uncontrollable event a change inlawsarehuge.SinceBeifangis a Chinese company, headquartered in Beijing, the case also provides an opportunity for some useful secondary learning.Beifang, like most Chinese companies, uses performance-dependent incentive compensation, even though Chinese is an avowedly communist country with a socialist market economy.

Case Questions:

1. To what extent, if at all, should Mr.Zhouprovide incentive compensation for his employees when his company is losing money? Why? What factors did you take into consideration in making your judgment?
2. Some companies make performance evaluation and bonus adjustments to protect managers from the harmful effects of many uncontrollable factors. Other companies make no such adjustments. Is one of these approaches clearly inferior, or is this just a "management style" choice?