Ho News Report Group has two major divisions: print and Internet. John Mendenhall, CEO of News Report Group, soeke your advice on revising the existing bonus plan for division managers of News Report Group. Assume division managers do not like bearing risk. Mendenhall is considering three ideas UF Requirement 1. Evaluate the three ideas Mendenhall has put forth using performance-evaluation concepts described in this chapter Indicate the positive and negative features of each proposal Eet's begin by matching the positive features with each of the deas Managers may be motivated to take actions that are in the best interests More info The two division managers annual bonuses are based on division ROI (defined as operating income divided by total assets). If a division reports an increase in ROI from the previous year, its management is automatically eligible for a bonus however, the management of a division reporting a decline in Rol has to present an explanation to the News Report Group board and is unlikely to get any bonus Now match the negativ - 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 Rl of the other division Re Me Print Done M Next News Report Group has two major divisions print and Internet. John Mendenhall , CEO of News Report Group, seeks your advice on revising the Requirement 1. Evaluate the three ideas Mendenhall has put forth using performance-evaluation concepts described in this chapter, Indicate the positive and negative features of each proposal Let's begin by matching the positive features with each of the ideas. Managers may be motivated to take actions that are in the best interests of the company rather than actions that maximize a division's RI Cancels out the effects of common noncontrollable factors that affect a performance measure. Taking out the effects of these factors provides better information about a manager's performance. Managers would be motivated to put in extra effort to increase RI because managers' rewards would increase with increases in RI. Now match the negative features with each of the ideas. Each division manager's compensation will now depend not only on the performance of that division manager but also on the performance of the other division managers. Managers are subject to excessive risk, because each division's RI depends not only on the manager's effort but also on random factors over which the manager has no control. | if the noncontrollable factors are not the same, then comparing the RI of one division to the RI of the other division will not provide useful Information for relative performance evaluation Requirement 2. Mendenhall is concerned that the pressure for short-run performance may cause managers to cut corners. What systems might Mendenhall introduce to avoid this problem? Explain briefly, Mendenhall can guard against such problems by introducing and upholding strong of control within the company. Using other systems, such as levers of control-can cause managers to cut corners and take other actions that boost short-run Next Requirement 1. Evaluate the three Ideas Mendenhall has put forth using performance-evaluation concepta described in this chapter. Indic positive and negative features of each proposal Let's begin by matching the positive features with each of the ideas. Managers may be motivated to take actions that are in the best interests y rather than actions that maximize a division's RI. ffects of common noncontrollable factors that affect Compensation: division's Rl minus other division's RI. measure. Taking out the effects of these factors Compensation depends on companywide RI. Ir information about a manager's performance be motivated to put in extra effort to increase RI Compensation depends on division RI. agers' rewards would increase with increases in RI. Now match the negative features with each of the ideas. Each division manager's compensation will now depend not only on the performance of that division manager but also on the performance of the other division managers. Managers are subject to excessive risk, because each division's RI depends not only on the manager's effort but also on random factors over which the manager has no control If the noncontrollable factors are not the same, then comparing the RI Now match the negative features with each of the ideas Each division manager's compensation will now depend not only on the performance of that division manager but also on the performance of the other division managers Managers are subject to excessive risk, because each division's RI depends not only on the manager's effort but also on random factors over which the manager has no control | if the noncontrollable factors are not the same, then comparing the RI of one division to the Rl of the other division will not provide useful information for relative performance evaluation Requirement 2. Mendenhall is concerned that the pressure for short-run performance may cause managers to cut comers. What systems might Mendenhall introduce to avoid this problem? Explain briefly, Mendenhall can guard against such problems by introducing and upholding strong of control within the company. Using other systems, such as levers of control-can cause managers to cut comers and take other actions that boost short-run performance but harm the company in the long run. Requirement 3. Mendenhall is also concemed that the pressure for short-run performance might cause managers to ignore emerging threats and opportunities. What system might Mendenhall introduce to prevent this problem? Explain briefly. control systems, based on debate and discussion and regular review of strategic uncertainties can help overcome this problem Mendenhall ask for regular reports on ROI, RI, etc. He with division managers to discuss 5- and 10-year strategic plans and obtain their field-based inputs. Next Ho News Report Group has two major divisions: print and Internet. John Mendenhall, CEO of News Report Group, soeke your advice on revising the existing bonus plan for division managers of News Report Group. Assume division managers do not like bearing risk. Mendenhall is considering three ideas UF Requirement 1. Evaluate the three ideas Mendenhall has put forth using performance-evaluation concepts described in this chapter Indicate the positive and negative features of each proposal Eet's begin by matching the positive features with each of the deas Managers may be motivated to take actions that are in the best interests More info The two division managers annual bonuses are based on division ROI (defined as operating income divided by total assets). If a division reports an increase in ROI from the previous year, its management is automatically eligible for a bonus however, the management of a division reporting a decline in Rol has to present an explanation to the News Report Group board and is unlikely to get any bonus Now match the negativ - 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 Rl of the other division Re Me Print Done M Next News Report Group has two major divisions print and Internet. John Mendenhall , CEO of News Report Group, seeks your advice on revising the Requirement 1. Evaluate the three ideas Mendenhall has put forth using performance-evaluation concepts described in this chapter, Indicate the positive and negative features of each proposal Let's begin by matching the positive features with each of the ideas. Managers may be motivated to take actions that are in the best interests of the company rather than actions that maximize a division's RI Cancels out the effects of common noncontrollable factors that affect a performance measure. Taking out the effects of these factors provides better information about a manager's performance. Managers would be motivated to put in extra effort to increase RI because managers' rewards would increase with increases in RI. Now match the negative features with each of the ideas. Each division manager's compensation will now depend not only on the performance of that division manager but also on the performance of the other division managers. Managers are subject to excessive risk, because each division's RI depends not only on the manager's effort but also on random factors over which the manager has no control. | if the noncontrollable factors are not the same, then comparing the RI of one division to the RI of the other division will not provide useful Information for relative performance evaluation Requirement 2. Mendenhall is concerned that the pressure for short-run performance may cause managers to cut corners. What systems might Mendenhall introduce to avoid this problem? Explain briefly, Mendenhall can guard against such problems by introducing and upholding strong of control within the company. Using other systems, such as levers of control-can cause managers to cut corners and take other actions that boost short-run Next Requirement 1. Evaluate the three Ideas Mendenhall has put forth using performance-evaluation concepta described in this chapter. Indic positive and negative features of each proposal Let's begin by matching the positive features with each of the ideas. Managers may be motivated to take actions that are in the best interests y rather than actions that maximize a division's RI. ffects of common noncontrollable factors that affect Compensation: division's Rl minus other division's RI. measure. Taking out the effects of these factors Compensation depends on companywide RI. Ir information about a manager's performance be motivated to put in extra effort to increase RI Compensation depends on division RI. agers' rewards would increase with increases in RI. Now match the negative features with each of the ideas. Each division manager's compensation will now depend not only on the performance of that division manager but also on the performance of the other division managers. Managers are subject to excessive risk, because each division's RI depends not only on the manager's effort but also on random factors over which the manager has no control If the noncontrollable factors are not the same, then comparing the RI Now match the negative features with each of the ideas Each division manager's compensation will now depend not only on the performance of that division manager but also on the performance of the other division managers Managers are subject to excessive risk, because each division's RI depends not only on the manager's effort but also on random factors over which the manager has no control | if the noncontrollable factors are not the same, then comparing the RI of one division to the Rl of the other division will not provide useful information for relative performance evaluation Requirement 2. Mendenhall is concerned that the pressure for short-run performance may cause managers to cut comers. What systems might Mendenhall introduce to avoid this problem? Explain briefly, Mendenhall can guard against such problems by introducing and upholding strong of control within the company. Using other systems, such as levers of control-can cause managers to cut comers and take other actions that boost short-run performance but harm the company in the long run. Requirement 3. Mendenhall is also concemed that the pressure for short-run performance might cause managers to ignore emerging threats and opportunities. What system might Mendenhall introduce to prevent this problem? Explain briefly. control systems, based on debate and discussion and regular review of strategic uncertainties can help overcome this problem Mendenhall ask for regular reports on ROI, RI, etc. He with division managers to discuss 5- and 10-year strategic plans and obtain their field-based inputs. Next
