Question
The Lunatic Fringe operates a chain of up-scale hair salons. Each salon manager receives a bonus of $2,500 if he or she meets or exceeds
The Lunatic Fringe operates a chain of up-scale hair salons. Each salon manager receives a bonus of $2,500 if he or she meets or exceeds the target set for four measures in their balanced scorecard. If they meet three targets, they get $7,500 bonus. If they meet one target, they receive a $2,500 bonus.
The following tables defines the four targets:
The West End salon of the Lunatic Fringe had the following operating statistics for the fiscal year:
Net income...........................................$139,500
Total Assests..........................................$634,000
Number of customer surveys.......................672
Number of customer surveys “satisfied”.....646
Number of customers...................................915
Number of customers served on time.......833
Employee turnover..........................................5
Number of employees...................................15
How much bonus will Lucy Chan, the West End manager of the Lunatic Fringe, receive? Discuss the potential positive and negative effects on the business of the West End salon and of Lunatic Fringe by tying Lucy’s bonus to these performance reviews.
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