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Performance Measurement & Rewards - PowerPoint PPT Presentation


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Ex. Chapter. Performance Measurement & Rewards. Articles. “Performance Review: Perilous Curves Ahead” “From Balanced Scorecard to Strategic Gauges: Is Measurement Worth It?” “Risky Business: The New Pay Game” “Why Incentives Cannot Work”. Performance: Units vs. Managers.

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Presentation Transcript
slide1

Ex

Chapter

Performance

Measurement & Rewards

Articles

  • “Performance Review: Perilous Curves Ahead”
  • “From Balanced Scorecard to Strategic Gauges: Is Measurement Worth It?”
  • “Risky Business: The New Pay Game”
  • “Why Incentives Cannot Work”
slide2

Performance: Units vs. Managers

  • Measure performance of operating units.
    • planning, decision-making, control
  • Measure performance of managers.
    • to hold managers responsible
    • an incentive to perform well
    • promotion, firing, pay raises …
slide3

Performance: Units vs. Managers

  • Performance of the manager might differ from performance of the unit.
  • expenses over which manager has no control
    • corporate overhead, rent, etc.
  • a good managers might be assigned to a poor division
slide4

Rewards

  • Should managers be rewarded?
    • incentives to perform well
    • attracts talented managers to the firm
    • might encourage dysfunctional behavior
  • Reward effort or performance?
    • effort is difficult to measure
    • performance = skill + effort + uncontrollable factors
slide5

Rewards

  • How much risk?
    • stronger incentives  greater risk
    • more uncertainty  greater risk
    • most managers are risk averse
  • Managers rarely have complete control.
    • rewards are risky…
    • … but they increase incentives
slide6

Comparative Performance

  • Comparing operating units.
    • some comparisons are more meaningful than others:
      • ROI vs. income
      • % sales growth vs. $ sales growth
  • an alternative: compare actual performance to a performance target
slide7

Performance Targets

  • Advantages of targets
    • standards against which performance can be judged
    • to help managers focus their effort
  • Disadvantages of targets
    • incentives to set a low target
    • incentives to manipulate the numbers
slide8

Performance Targets

  • How difficult should targets be?
    • conventional wisdom: tight but attainable
    • depends on how targets are used
    • difficulty tells manager where to direct attention
slide9

Performance Criteria

  • Objective vs. subjective evaluation
    • objective measures don’t tell the whole story
    • subjective evaluations are harder to defend and tend to be overly positive
  • Financial vs. non-financial measures
    • financial: the bottom line
    • non-financial: can be more forward-looking

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