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Case_04_Best_Laid_Incentive_Plans_TN - Teaching Note Case 4...

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Teaching Note: Case 4 – The Best-Laid Incentive Plans Case Objectives 1. To help students understand how strategic control systems link to performance management. 2. To highlight the importance of aligning both informational and behavioral control systems with organizational strategy. 3. To help students understand the importance of a strong, positive culture and reward systems that rely more on achievement of jointly created and internalized goals and objectives than on rules and regulations. 4. To encourage discussion of the implications of a firm’s strategy for the structure of its organization: which structure might make the most sense, which structure might facilitate the flow of information and encourage close and effective working relationships between functional departments and activities. See the table below to determine where to use this case: Chapter Use Key Concepts 9: Strategic Control & Governance Strategic control; traditional vs. contemporary control systems; informational vs. behavioral control; reward systems 10: Organizational Design Organizational structure; “boundaryless” organizational designs Case Synopsis Hiram Phillips was CFO and chief administrative officer of Rainbarrel Products, a diversified consumer-durables manufacturer. At the beginning of the case, Phillips is expecting good news from the year end statistics regarding the performance management system he’d put into place a year ago. He needed good news going into the upcoming meeting of the corporate executive council. Before Phillips’ arrival a year ago, Rainbarrel had been facing financial difficulties due to lax budgetary discipline and a slowdown in consumer spending after a decade-long boom. The CEO Keith Randall was an inspiring leader who focused on innovation, but had allowed the organization to become a little lax. Phillips had instituted the performance management system to control costs: reducing headcount by identifying poor performers and firing them, increasing productivity in the call center by establishing limits on time spent per customer call and setting goals for answering emails within 24 hours of opening the email, establishing goals for percentage of goods shipped by promise date by measuring when the goods actually left company property, changing policy on how salespeople earned commissions by rewarding them with a percentage based only on the actual purchase price. The next day at the council meeting, Phillips was shocked to hear the results of the annual employee survey and the market survey of Rainbarrel’s valued customers: employee morale was way down, and key customers were complaining. It appeared that Phillips’ new performance management and incentive system was having some unanticipated effects. What was the problem? Should Rainbarrel revisit its approach to performance management?
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Teaching Plan
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Case_04_Best_Laid_Incentive_Plans_TN - Teaching Note Case 4...

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