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    Performance Evaluation at Falcon Inc.

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    Please refer to the attached case study and answer the following:
    1. What are the costs associated with a bad PES system? Relate your answer to Jack Welch's quote from the book. "Winning".

    2. How is the controllability principle being broken in the case? Is Tanaka a good/bad manager? Is Bogage a good manager?

    3. What are the consequences and risks of using the PES just as they are presented in the case?

    4. What do you propose to improve the PES at Falcon?

    5. Please comment on the following quote: "We can have good a good subsidiary and a bad manager. Or we can have a bad subsidiary and a good manager. Each of these two combinations can occur at the same time and space".


    Gujarathi, M. R., & Govindarajan, V. (2007). Falcon, Inc.: Performance evaluation of foreign subsidiaries. Issues in Accounting Education, 22(2), 233-245.

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    Solution Preview

    1. According to Jack Welch, an effective performance evaluation system relies not only on honest feedback but also on meaningful differentiation among employees (Vollmer, 2005). He implemented a forced ranking system at GE where employees were divided into three distinct segments: the top 20 percent of performers, the middle 70 percent and bottom 10 percent. He said that an organization's job is winning.

    A poorly designed performance evaluation system results in many indirect costs like loss of productivity that happens when performance problems are not addressed properly. The receiving side of performance evaluation can get upset, angry, demoralized and de-motivated. Hence, a bad PES is worse than having no PES at all.

    2. In appraising the performance of divisional management, no account should be taken of matters outside the division's control. However in practice the controllability principle is often ignored. As a result managers are held accountable for areas over which they have little or no control (Merchant, n.d). In ...

    Solution Summary

    The response discusses performance evaluation system as it relates to Falcon Inc.