# 4 assuming the variability is due to machines the

• Notes
• coecoe85
• 41
• 100% (1) 1 out of 1 people found this document helpful

This preview shows page 19 - 23 out of 41 pages.

calibration, material variability, human error, etc.) 4) Assuming the variability is due to machines the company may choose to better calibrate the existing machines, purchase new machines that are more precise, or investigate other engineering alternatives 5) Finally, once improvements have been made to the existing machines, the company needs to monitor the improvements to ensure that the variability problem has been resolved.
19-23 SOLUTION EXHIBIT 19-29 Plots of Mean Weight per Production Run for Keltrex Cereals 17.3017.4417.5817.7217.8618.0018.1418.2818.4218.56012345678910WeightProduction RunD ouble Bran BitsMe an + Me an – 2σ13.6013.6813.7613.8413.9214.0014.0814.1614.2414.32012345678910WeightProduction RunHone y Whe at Square sMe an+2σMe an–2σ15.4415.5815.7215.8616.0016.14
16.2816.4216.5616.70012345678910WeightProduction RunSugar King PopsMe an–2σMe an–2σ19-24 19-30 (30–40 min.) Compensation linked with profitability, waiting time, and quality measures. 1. Jan.-June July-Dec. Philadelphia Add: Profitability 0.75% of operating income \$83,625 \$78,750 Add: Average waiting time \$40,000 if < 10 minutes 0 0 Deduct: Patient satisfaction \$40,000 if < 65 0 0 Total: Bonus paid \$83,625 \$78,750 Baltimore Add: Profitability 0.75% of operating income \$71,250 \$44,063 Add: Average waiting time \$40,000 if < 10 minutes 0 40,000 Deduct: Patient satisfaction \$40,000 if < 65 (40,000) 0 Total: Bonus paid \$31,250 \$84,063 2. Operating income as a measure of profitability Operating income captures revenue and cost-related factors. However, there is no recognition of investment differences between the two groups. If one group is substantially bigger than the other, differences in size alone give the president of the larger group the opportunity to earn a bigger bonus. An alternative approach would be to use return on investment (perhaps relative to the budgeted ROI). 10 minute benchmark as a measure of patient response time This measure reflects the ability of East Coast Healthcare to meet a benchmark for patient response time. Several concerns arise with this specific measure:
a. It is a yes-or-no cut-off. A 12-minute waiting time earns no bonus, but neither does a two hour wait. Moreover, no extra bonus is paid for additional waiting time reductions below 10 minutes. An alternative is to have the bonus that increases with greater waiting time improvements. b. It can be manipulated. Doctors might quickly make initial contact with a patient to meet the benchmark, but then leave the patient sitting in the examination room for a more detailed examination or procedure to take place. c. It reflects performance relative only to the initial waiting time. It does not consider other time-related issues such as the wait for an appointment or the time needed to fill out forms.