Question

Exercise 1-1.

You Get what you Measure [LO 3]

A key idea in this book is that “You get what you measure!” Essentially, this means that performance measures have a great influence on the behavior of managers.

Required:

Select a company with which you are familiar. Identify three performance measures that the company might use. For each measure, identify a favorable outcome and an unfavorable outcome that might occur because the measure is used to evaluate manager performance

Answer 1

Performance measures is a process of collecting , analysing and report information about the performance of an individual , group or an organisation. This is achieved by setting measures (metrics) that are used to measure the performance of the person , group or organisation.

For this exercise , we shall lay down three performance measures that shall be used by an organisation to evaluate the performnce of the managers and how the measure could affect the behaviour.

The company that could be used for the exercise is best buy retail outlet , physical store . Please find below the measures and their impact

Measure Metric Purpose of the measure Favorable outome anticipated Unfavorable outcome anticipated Since the performance is directed at a sinle number, This Identify the revenue realised by the team that would provide good returns for the company that would contribute to the growth of the company in turn also leading to profits Increased revenue means more sales which could be a could mean some managers can create a pressure to the team measure of the performance of the team that wouldmembers for achieving the target and hence would result in help identify the managers how the team is assisting low morale and could possible attrition at work due to the the customers which is converting into sales. This increased pressure by the managers. Also, Sales figure alone could be a good motivator since more the sales is done cannot measure if the employees are converting the prospects and target is achieved, the manager would be motivated Revenue realised Amount of sales done in $ into customers since the customers could have walked in the store with a decision and hence the value in sales need not reflect the skill of the employee or the manager There could also be instances where the customer may not This shallI help identify the unhappy customers who would in turn return the product for either replacement or for money back The managers and the teams would be motivated to sell clearly communicate the need or the manager could not products which meets the requirements of the customers and hence they would not be forced to particular product line had some defects wwhich was was not the products which maynot meet the demands of the apparent and could have caused higher value of returns. The customers thereby reducing the rate of returns understand the requirement of the customer clearly or a Returns received % of returns to the products sold measure shall clearly draw boundaries to identify the root cause to ensure the manager is not penalised To check for people who leave the oreanisation and ensuring employees are retained which in Managers behaiour would be around to strenghthen several other limiting factors such as the budget allocated to turn reduce the cost of training and employee relationship to ensure employees are replacing a new employee and also retained in the organisation and in turn that contribute the market could indicate cause the attrition to happen that employees sustaining for a long to organisation well being time ensures that the organisations goodwill is maintained Though managers could ensure their part, there could be the store or the compensation that is not competitive as per could happen outside the factors of the manager,this could Employee Attrition rate % of attrition indeed result in managers blaming other factors