1 / 13

Performance Measurement & Management Compensation

Performance Measurement & Management Compensation. Chapters 10 & 11, Management Control Systems, 12th Ed., Anthony and Govindarajan. Performance Measurement. Purpose is to implement strategy Should look at both short- and long-term Must measure critical success factors Current Future

emilynelson
Download Presentation

Performance Measurement & Management Compensation

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Performance Measurement &Management Compensation Chapters 10 & 11, Management Control Systems, 12th Ed., Anthony and Govindarajan

  2. Performance Measurement • Purpose is to implement strategy • Should look at both short- and long-term • Must measure critical success factors • Current • Future • Used to motivate and reward people

  3. The Balanced Scorecard • Simply put, it’s a performance measurement system • Provides goals • Provides measurement metrics • It must be based on strategy • Should stress what’s important for the organization

  4. The Balanced Scorecard • Basic example deals with 4 perspectives • Financial (external) • Customer • Internal business (processes) • Innovation & Learning • Can be expanded to encompass other areas

  5. Implementation • What’s the organizational strategy? • What’s the specific goal? • Must be measurable • How is it to be measured? • Must provide for quantification • Does it integrate measures into the evaluation system? • Are the results reviewed frequently?

  6. What to Avoid • Emphasis on short-term financial measures • Attempts to link nonfinancial measures with financial results • Excessive goals and measurements • Outdated targets (goals) • Failure to use interactive control • Don’t try to integrate into Balanced Scorecard

  7. Management Compensation • Should seek goal congruence • Should provide positive incentives • Should be focused on a “team effort” • Should require conformance to standard procedures

  8. Compensation Plans • Normally consists of • Salary (contract driven) • Benefits (contract driven) • Incentives (performance driven) • Usually divided into • Short-term • Long-term

  9. Short-Term Incentive Plans • Normally based on performance in a given year • Examples include • Bonus pools, carryovers, and deferred compensation

  10. Long-Term Incentive Plans • Normally based on the company’s performance over a period greater than one year • Examples include • Stock options, phantom shares, stock appreciation rights, performance shares, and performance units

  11. Types of Incentives • Financial • Money • Benefits • Perquisites • Nonfinancial • Promotion • Autonomy • Recognition

  12. Performance Criteria • Reasonable and understandable • Adjustable, as needed • Orient on both • Short-term performance • Long-term performance • Measurable against planned

  13. Agency Theory • Decision-making authority delegated by owners to service providers • Owners expect service providers to act in owners best interest • Owners and service providers do not have same objectives • Each party will act in own best interest • Each party will have different risk tolerances

More Related