4-1: Choosing Performance Measures
Jen and Barry opened an ice cream shop in Eugene. It was a big success, so they decide to
open a ice cream shops in many cities including Portland. They hire Dante to manage the shop in
Portland. Jen and Barry are considering two different sets of performance measures for Dante.
The first set would grade Dante based on the cleanliness of the restaurant and customer service.
The second set would use accounting numbers including the profit of the shop in Portland.
What are the advantages and disadvantages of each set of performance measures?
4-1: Solution to Choosing Performance Measures (20 minutes)
4-2: Linking Decision Rights and Knowledge
Professional football teams have both a coach and a general manager. The general manager
is usually responsible for the general operations of the organization and maintains the decision
rights for selecting personnel on the football team. The coach is responsible for the training of the
football team and making decisions on game day. Many coaches have been unhappy with their
relationship with the general manager and feel they should have more decision rights in choosing
the players on the team. Some of the top coaches are now insisting on also being general managers.
What are the advantages and disadvantages of separating the duties of the coach and
general manager with respect to selecting members of the football team?
4-2: Solution to Linking Decision Rights and Knowledge (15 minutes)
4-3: Monitoring Computer Use
Samson Company is an engineering firm. Many of the employees are engineers who are
working individually on different projects. Most of the design work takes place on computers.
The computers are connected by a network and employees can also “surf” the internet through
their desk top computers.
The president is concerned about productivity among his engineers. He has acquired
software that allows him to monitor each engineer’s computer work. At anytime during the day,
the president can observe on her screen exactly what the different engineers are working on. The
engineers are quite unhappy with this monitoring process. They feel it is unethical for the president
to be able to access what they are working on without their knowledge.
Describe the pros and cons of monitoring through observing the computer work of the
engineers.
4-3: Solution to Monitoring Computer Use (15 minutes)
4-4: Choosing Performance Measures
The president of the Canby Insurance Company has just read an article on the balanced
scorecard. A company has a balanced scorecard when there is a set of performance measures that
reflect the diverse interests and goals of all the stakeholders (shareholders, customers, employees,
and society) of the organization. Presently, Canby Insurance Company has only one performance
measure for the top executives: profit. The board of directors claims that profit as the sole
performance measure is sufficient. If customers are satisfied and employees are productive, then
the company will be profitable. Any other performance measure will detract from the basic goal
of making a profit.
Required:
Explain the costs and benefits of only having profit as a performance measure.
4-4: Solution to Choosing Performance Measures (15 minutes)