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Questions for Operation Management

Directions: Post your analysis providing how you would handle the situation, your thoughts about the situation and any similar experiences you may have had. Basically just a 250 response to if you agree or not and what could be done to make it better.

Case Study: Bonus Points

You are the director of development of a biomedical research organization. The organization's board decides to establish a bonus plan for all senior managers, based on performance of responsibilities. Your bonus is to be 10 percent of your annual salary if you bring in 10 new corporate sponsorships and another 10 percent of your annual salary if you bring in at least 10 major gifts of $ 10,000 or more.

A. Would this bonus plan be acceptable under the
AFP Code of Ethical Principles and Standards? 1. Yes 2. No 3. It depends 4. Don't know
Answer: 1. Yes. The AFP Code provides that members may accept performance-based compensation, such as bonuses, provided such bonuses are not based on a percentage of contributions. In this case, the bonus is a fixed amount, and it is based on the number of sponsorships and major gifts that you bring in , not a percentage of the amount of the contributions.

B. Suppose that instead of the foregoing plan, the size of the bonus was based on your performance in three areas: Number of new volunteers recruited Number of new major gifts received Exceeding the amount raised the previous year in the organization's annual fund Could such a bonus plan be acceptable under the AFP Code? 1. Yes 2. No 3. It depends 4. Don't know

Answer: 1. Yes, as there is no violation of Standard No. 22. This is an example of a performance-based compensation plan that provides financial and nonfinancial indicators that are acceptable under the Code. C. Suppose that the bonus was a fixed amount (5 percent of your base salary) and was based on achieving three performance targets: Recruiting 50 new volunteers Successfully soliciting 10 new major gifts Growing the organization's annual fund receipts from the previous year Would this bonus plan pass muster under the AFP Code? 1. Yes 2. No 3. It depends 4. Don't know Answer: 1 . Yes. There is no violation of the Code, and the criteria are not based on a percentage of contributions.

Next case:

Case Study: Helping the Needy

You are director of an international emergency relief program. Within one month, three large-scale disasters occur: an earthquake in Mexico, a hurricane in the Pacific, and a flood in the United States. Because of the severity of the disasters and the thorough, constant media coverage, donations have been pouring in. Most gifts are designated to either the earthquake or the hurricane victims; however, many people in the United States have lost their homes in the flood and are in desperate need of help. As time passes, you see that the relief needs of the hurricane and earthquake victims will be easily met by 60 percent of the relief money coming in, but more than 95 percent of the money is designated by the donors for the hurricane and earthquake, leaving you with insufficient funds to meet the needs in the United States.

A. Would it be a violation of the AFP Code to use some of the donations designated for the earthquake or hurricane victims to assist victims of the flood? 1. Yes 2. No
3. It depends 4. Don't know
Answer: 1. Yes. This would be a violation of Standard No. 14: Members shall take care to use contributions in accordance with donors' intentions.

B. To comply with the Code, should you return the donations that were not needed in the areas for which they were designated? 1. Yes 2. No 3. It depends 4. Don't know
Answer: 3. It depends. A member could contact a donor, explain the circumstances, and request permission to use the funds for a different disaster (Standard No. 16: Members shall obtain explicit consent by donors before altering the conditions of financial transactions). If permission is not provided, donations should be returned in order to comply with the Code. Building on Principle Bucky Passer is the vice president for advancement and alumni affairs of a small college. After many months of careful cultivation, he succeeds in obtaining a pledge from a famous alum for the largest gift in the college's history. The only catch is, the alum insists that the college put his name on a building that was named for a previous donor (now deceased) as a condition of that donor's gift. Bucky tries to persuade the new donor to change his mind, but the donor is insistent.

A. What should Bucky do?
Answer: Bucky has a responsibility to vigorously and ethically raise funds for his college while ensuring that the intent of all donors is honestly fulfilled. Presumably the naming of the building (in perpetuity) was a part of the donor gift agreement, and to make any changes would be a violation of Standards No. 14 and No. 16. Bucky may wish to get advice from counsel if the gift agreement is complex or if one was not written. Assuming the board approves significant naming opportunities, he will need to take the matter to his board with the advice that the original donor's name remain on the building.

B. Suppose the new donor agrees to a proposal to name the building jointly for both donors. Would this arrangement pass muster under the "donor consent" standard of the AFP Code? Answer: The proposal on its own would not pass the "donor consent" test. The guideline to Standard No. 16 notes that a member may meet with surviving family members or legal representatives to discuss potential alteration in the original conditions of a contribution . Again, the gift agreement must be reviewed to ensure the donor's intentions are met whether or not the family members or representatives agree to altering the gift.

C. Suppose the college president and the board of trustees vote to rename the building for the new donor. What should Bucky do?

Answer: For this scenario, we will assume that the president and board have the ultimate authority to accept or decline a gift (certainly a gift of this magnitude). If the board and president are in breach of the terms of the donor's gift agreement and/ or not complying with approved donor recognition and naming policies, Bucky should resign from the college. He will not be able to adhere to the AFP Code nor to practice his profession with integrity, honesty, and truthfulness at this institution. Should Bucky also be a whistleblower, or will that conflict with his fiduciary responsibility to the college?

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Case Study: Bonus Points

You are the director of development of a biomedical research organization. The organization's board decides to establish a bonus plan for all senior managers, based on performance of responsibilities. Your bonus is to be 10 percent of your annual salary if you bring in 10 new corporate sponsorships and another 10 percent of your annual salary if you bring in at least 10 major gifts of $ 10,000 or more.

A. Would this bonus plan be acceptable under the
AFP Code of Ethical Principles and Standards? 1. Yes 2. No 3. It depends 4. Don't know
Answer: 1. Yes. The AFP Code provides that members may accept performance-based compensation, such as bonuses, provided such bonuses are not based on a percentage of contributions. In this case, the bonus is a fixed amount, and it is based on the number of sponsorships and major gifts that you bring in , not a percentage of the amount of the contributions.

As long as the bonuses aren't meant to influence the selection of products or services from these corporate sponsors, the board members have the autonomy to accept performance-based compensation, such as bonuses, provided such bonuses are in accord with prevailing practices within the members' own organization.

B. Suppose that instead of the foregoing plan, the size of the bonus was based on your performance in three areas: Number of new volunteers recruited Number of new major gifts received Exceeding the amount raised the previous year in the organization's annual fund Could such a bonus plan be acceptable under the AFP Code? 1. Yes 2. No 3. It depends 4. Don't know

Answer: 1. Yes, as there is no violation of Standard No. 22. This is an example of a performance-based compensation plan that provides financial and nonfinancial indicators that are acceptable under the Code. C. Suppose that the bonus was a fixed amount (5 percent of your base salary) and was based on achieving three performance targets: Recruiting 50 new volunteers Successfully soliciting 10 new major gifts Growing the organization's annual fund receipts from the previous year Would this bonus plan pass muster under the AFP Code? 1. Yes 2. No 3. It depends 4. Don't know Answer: 1 . Yes. There is no violation of the Code, and the criteria are not based on a percentage of contributions.

As referenced in the previous response, the bonuses cannot influence the selection of products or services but if they are in accordance with regular standard practices, members are able to ...

Solution Summary

This solution provides answers to questions regarding operation management based on a case study.

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