Management Control System Design Objective: You are designing an incentive system that you hope will align employee efforts with shareholder goals Financial Goal: Maximize shareholder returns Part 1: Evaluate each the following potential performance measures with respect to how well it aligns employee effort with the goal of maximizing shareholder returns. Consider the strengths and weaknesses of awarding bonuses based on the managers' level achieved of each performance measure. Evaluate each measure along four dimensions: 1) Alignment of interests between employee and shareholder (including relevant time horizon), 2) Maximizing information about productive effort while minizing "noise" outside employees' control (e.g. objective, relative, subjective), 3) Ease of calculation, and 4) Ease of communication and employee understanding Utilize the following data to illustrate the evaluation of each financial performance measure (Use Labeled Tabs as templates of each Performance Measure): Status Quo Company Data (without Potential Project): Data relating to Potential Project that could be added: Average Net Operating Assets Sales Revenue Operating Expense Required Rate of Return $1,000,000 Incremental Net Operating Assets $1,500,000 Incremental Sales Revenue. $1,400,000 Incremental Operating Expense 18% $100,000 $150,000 $134,000