See attached case study: Incentive plans at McDonald's.
The incentive plans should be such that they promote goal congruence. The actions of the managers should benefit both the organization and the manager. We evaluate the given plans with this objective.
Plan 1 - The bonus is based on increase in sales volume over the previous year. This is not a good incentive plan as the manager can increase the sales volume by reducing the price. Thus the manager would benefit at the cost of the organization.
Plan 2- This is based on subjective evaluation and no quantitative measures. This is not good as it depends on the superior how to interpret the information. Managers may also give misleading information as there is no ...
The solution details the pros and cons of the incentive plans at McDonald's