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Measurement system, compensation policy and bonus plan

1. Evaluate the following statement:
The overarching purpose of a measurment system should be to help a team, rather than senior managers, gauge its progress. A team's measurment system should primarily be a tool for telling the team when it must take corrective action.

2. The Green Shoe Company is considering going to a piece rate system, where manufacturing employees are paid based on thei level of output. Discuss what factors the firms should consider in deciding whether this idea should be implemented. How should the initial piece rate be set? Under what circumstances should the company alter the piece rate once it is adopted?

3. Your company currently has a bonus plan for its slaes managers. If annual sales for a nanager's unit exceed $1 million, the manager receives a $10,000 bonus. In a typical year, about 5 of the 10 mangers in the firm meet the target and receive the bonus. However, the number receving the bonus varies from year to year due to the state of the economy, which in turn has an evvect on sales. The company is considering repalcing the bonus plan with a plan that rewards the top-five selling managers each year with a $10,000 bonus. Dicuss the potential benefits and costs of the new plan relative to the old plan.

4. Communities are frequently concerned about whether police are vigilant in carrying out their responsibilities. Several communities have experimented with incentive compensation for police. In particular, some cities have paid members of the police force based on the number of arrests that they personally make. Discuss the likely effects of this compensation policy.

Solution Preview

1) The main purpose of a measurement system should be to enhance the performance of a team by rectifying its mistakes, rather than to judge individual performances by pointing out their mistakes. In other words, the system should not be an authoritarian tool to keep employees on their toes for carrying out their tasks. Rather, it should be used as an effective tool to point out deviations in the employee's actions to carry out quick rectifications and prevent future deviations. This will serve real purpose of the measurement system in the sense that employee's performance will be enhanced and productivity would be increased.

2) The major factors that firm should consider are:
a) Quality of the product: The most important consideration that the firm should have while implementing this system is the fact ...

Solution Summary

The main purpose of a measurement system should be to enhance the performance of a team by rectifying its mistakes, rather than to judge individual performances by pointing out their mistakes.

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