Often government-owned companies in planned economies reward managers based on nonfinancial measures. For example, the government might give managers a bonus for exceeding a 5-year-planned target for production quantities. A problem with this method is that managers tend to predict low volumes so that officials will set the targets low. This makes it easier for the managers to meet the targets, but it severely hinders planning because managers do not provide accurate information about production possibilities. The former Soviet Union developed an alternative performance measurement and reward system. B (Click the icon to view the alternative measurement and reward system.) Assume that Cuba adopted this measure at a time when Soviet influence was great. Consider the Santa Clara Television Manufacturing Company (SCTMC). During 1983, the factory manager, Che Rodriguez, had to predict the number of TVs that SCTMC could produce during the next year. He was confident that at least 500,000 TVs could be produced in 1984, and most likely they could produce 700,000 TVs. With good luck, they might even produce 750,000. Government officials told him that the new performance evaluation measure would be used, and that X = 0.40, Y = 0.80, and Z = 1.00 for 1984 and 1985. Read the requirements. Requirement 1. Suppose Rodriguez predicted production of 700,000 TVs and SCTMC actually produced 700,000. Calculate the performance measure. Performance measure, 700,000 predicted production = - X i Data Table x - Requirements Suppose F is the forecast of production, A is actual production, and X, Y, and Z are positive constants set by top officials, with X, Y, Z > 0. The following performance measure was designed to motivate both high production and accurate forecasts. performance measure = (YXF) + (Xx (A - F)] if FSA (Yx F) - [Zx (F - A)] if F > A 1. Suppose Rodriguez predicted production of 700,000 TVs and SCTMC actually produced 700,000. Calculate the performance measure. 2. Suppose again that SCTMC produced 700,000 TVs. Calculate the performance measure if Rodriguez had been conservative and predicted only 500,000 TVs. Also calculate the performance measure if he had predicted 750,000 TVs. 3. Now suppose it is November 1974, and it is clear that SCTMC cannot achieve the 700,000 target. Does the performance measure motivate continued efforts to increase production? Suppose it is clear that SCTMC will easily meet the 700,000 target. Will the system motivate continued efforts to increase production? Print Done Print Done Often government-owned companies in planned economies reward managers based on nonfinancial measures. For example, the government might give managers a bonus for exceeding a 5-year-planned target for production quantities. A problem with this method is that managers tend to predict low volumes so that officials will set the targets low. This makes it easier for the managers to meet the targets, but it severely hinders planning because managers do not provide accurate information about production possibilities. The former Soviet Union developed an alternative performance measurement and reward system. B (Click the icon to view the alternative measurement and reward system.) Assume that Cuba adopted this measure at a time when Soviet influence was great. Consider the Santa Clara Television Manufacturing Company (SCTMC). During 1983, the factory manager, Che Rodriguez, had to predict the number of TVs that SCTMC could produce during the next year. He was confident that at least 500,000 TVs could be produced in 1984, and most likely they could produce 700,000 TVs. With good luck, they might even produce 750,000. Government officials told him that the new performance evaluation measure would be used, and that X = 0.40, Y = 0.80, and Z = 1.00 for 1984 and 1985. Read the requirements. Requirement 1. Suppose Rodriguez predicted production of 700,000 TVs and SCTMC actually produced 700,000. Calculate the performance measure. Performance measure, 700,000 predicted production = Requirements - X -X 1 Data Table Suppose F is the forecast of production, A is actual production, and X, Y, and Z are positive constants set by top officials, with X, Y, Z > 0. The following performance measure was designed to motivate both high production and accurate forecasts. performance measure = (Yx F) + [XX (A - F)] if FSA (Yx F) - [Zx (F - A)] if F > A 1. Suppose Rodriguez predicted production of 700,000 TVs and SCTMC actually produced 700,000. Calculate the performance measure. 2. Suppose again that SCTMC produced 700,000 TVs. Calculate the performance measure if Rodriguez had been conservative and predicted only 500,000 TVs. Also calculate the performance measure if he had predicted 750,000 TVs. 3. Now suppose it is November 1974, and it is clear that SCTMC cannot achieve the 700,000 target. Does the performance measure motivate continued efforts to increase production? Suppose it is clear that SCTMC will easily meet the 700,000 target. Will the system motivate continued efforts to increase production? Print Done Print Done Often government-owned companies in planned economies reward managers based on nonfinancial measures. For example, the government might give managers a bonus for exceeding a 5-year-planned target for production quantities. A problem with this method is that managers tend to predict low volumes so that officials will set the targets low. This makes it easier for the managers to meet the targets, but it severely hinders planning because managers do not provide accurate information about production possibilities. The former Soviet Union developed an alternative performance measurement and reward system. B (Click the icon to view the alternative measurement and reward system.) Assume that Cuba adopted this measure at a time when Soviet influence was great. Consider the Santa Clara Television Manufacturing Company (SCTMC). During 1983, the factory manager, Che Rodriguez, had to predict the number of TVs that SCTMC could produce during the next year. He was confident that at least 500,000 TVs could be produced in 1984, and most likely they could produce 700,000 TVs. With good luck, they might even produce 750,000. Government officials told him that the new performance evaluation measure would be used, and that X = 0.40, Y = 0.80, and Z = 1.00 for 1984 and 1985. Read the requirements. Requirement 1. Suppose Rodriguez predicted production of 700,000 TVs and SCTMC actually produced 700,000. Calculate the performance measure. Performance measure, 700,000 predicted production = - X i Data Table x - Requirements Suppose F is the forecast of production, A is actual production, and X, Y, and Z are positive constants set by top officials, with X, Y, Z > 0. The following performance measure was designed to motivate both high production and accurate forecasts. performance measure = (YXF) + (Xx (A - F)] if FSA (Yx F) - [Zx (F - A)] if F > A 1. Suppose Rodriguez predicted production of 700,000 TVs and SCTMC actually produced 700,000. Calculate the performance measure. 2. Suppose again that SCTMC produced 700,000 TVs. Calculate the performance measure if Rodriguez had been conservative and predicted only 500,000 TVs. Also calculate the performance measure if he had predicted 750,000 TVs. 3. Now suppose it is November 1974, and it is clear that SCTMC cannot achieve the 700,000 target. Does the performance measure motivate continued efforts to increase production? Suppose it is clear that SCTMC will easily meet the 700,000 target. Will the system motivate continued efforts to increase production? Print Done Print Done Often government-owned companies in planned economies reward managers based on nonfinancial measures. For example, the government might give managers a bonus for exceeding a 5-year-planned target for production quantities. A problem with this method is that managers tend to predict low volumes so that officials will set the targets low. This makes it easier for the managers to meet the targets, but it severely hinders planning because managers do not provide accurate information about production possibilities. The former Soviet Union developed an alternative performance measurement and reward system. B (Click the icon to view the alternative measurement and reward system.) Assume that Cuba adopted this measure at a time when Soviet influence was great. Consider the Santa Clara Television Manufacturing Company (SCTMC). During 1983, the factory manager, Che Rodriguez, had to predict the number of TVs that SCTMC could produce during the next year. He was confident that at least 500,000 TVs could be produced in 1984, and most likely they could produce 700,000 TVs. With good luck, they might even produce 750,000. Government officials told him that the new performance evaluation measure would be used, and that X = 0.40, Y = 0.80, and Z = 1.00 for 1984 and 1985. Read the requirements. Requirement 1. Suppose Rodriguez predicted production of 700,000 TVs and SCTMC actually produced 700,000. Calculate the performance measure. Performance measure, 700,000 predicted production = Requirements - X -X 1 Data Table Suppose F is the forecast of production, A is actual production, and X, Y, and Z are positive constants set by top officials, with X, Y, Z > 0. The following performance measure was designed to motivate both high production and accurate forecasts. performance measure = (Yx F) + [XX (A - F)] if FSA (Yx F) - [Zx (F - A)] if F > A 1. Suppose Rodriguez predicted production of 700,000 TVs and SCTMC actually produced 700,000. Calculate the performance measure. 2. Suppose again that SCTMC produced 700,000 TVs. Calculate the performance measure if Rodriguez had been conservative and predicted only 500,000 TVs. Also calculate the performance measure if he had predicted 750,000 TVs. 3. Now suppose it is November 1974, and it is clear that SCTMC cannot achieve the 700,000 target. Does the performance measure motivate continued efforts to increase production? Suppose it is clear that SCTMC will easily meet the 700,000 target. Will the system motivate continued efforts to increase production? Print Done Print Done