Participation Of Unit And Senior Management example essay topic

reject net income they believe will impress top management but could be perceived by their key employees as unattainable. Such an unrealistic target could discourage rather than motivate the operating unit employees. Targets must be clearly understood. It is critical that bonus participants participate in the setting of bonus targets.

Their views and suggestions should be given serious consideration. When their suggestions are rejected or modified, the reasons should be clearly communicated. Misunderstandings concerning the bonus targets create unproductive time spent in discussions and demoralized employees who believe that they are being treated unfairly. Periodically communicate the outlook for bonuses. To maximize the motivational value of the program, the financial staff of each operating unit should periodically communicate the current outlook for annual bonuses to bonus participants. This is accomplished by comparing a forecast of the bonus criteria with the bonus targets.

Using the forecast ed percentage of bonus earned for the unit, each participant can forecast his or her bonus. A review of the key actions necessary to accomplish or exceed the forecast should be included in this periodic bonus update. This can be a very strong motivational tool, because the bonus participants have an identifiable personal stake in the accomplishment of these actions. Many companies include a bonus update in their regularly scheduled operating review. Resolve bonus problems early. One way to accomplish this is to periodically update the outlook for bonuses for each operating unit.

Strong lines of communication are beneficial to both operating units and corporate staff. One of the benefits of a bonus update is early identification of problems, which require action on the part of senior management. By identifying problems in the bonus program as the year unfolds, it is possible to take prompt action, minimizing damage. If the bonus criteria have not been clearly stated, they should be modified with the participation of unit and senior management. Pay bonuses as soon as feasible. A bonus can represent a significant portion of a key employee's compensation.

This serves the purpose of getting his or her attention, which is a double-edged sword. The focus of attention should be the future, but for many employees the current year is not their chief concern until the previous year's bonus is paid. Delays in paying bonuses may create apprehension and tension which are counterproductive. If bonuses for the prior year cannot be paid within the first month of the New Year, some of the positive impact of the bonus program is lost. Put it in writing. It is important to commit the bonus program to writing, even if there are no legal requirements to do so.

A written program will help avoid misunderstandings and confusion, and will therefore benefit both the participants and administrators. Communication on how the incentive scheme works so that they are well informed on they are affected but them and how their actions affect the overall goals of Lincoln. Summary Lincoln should be more particular when designing the bonus scheme by more thoroughly cover the following issues: 1. who should participate - the front line employees who make actual customer contact vs. the executives who are the decision makers 2. frequency of bonus payments - to be really effective in motivating performance Lincoln should ensure immediacy in payments and even more frequent payments. 3. target and maximum incentive opportunity - Lincoln has researched market base and total cash data to help determine not only the best motivational incentive but also a way in keeping the top performers who produce the desired outcomes. The performance measures must be readily achievable 4. weights and objective setting - Lincoln must ensure there is an appropriate mix of organization-wide, business teams and individual objectives.

This enables the employee to gauge how their decision / efforts affect not only the outcome of their division but also the firm as a whole 5. market practice - Lincoln should also be aware of the developments of incentive schemes with comparable firms. This supports the firm in keeping their motivated employees and rid the firm those not interested. 6. communication - for Lincoln's incentive arrangement to actually achieve its worth - influence behaviors and performance through rewards - employees must understand: a. performance and behaviors required. the link between their individual performance and the rewards c. the financial value of the incentive This helps Lincoln's employees answer what they need to do and in doing so how much they receive. After all the incentive plan provide Lincoln's employees a meaningful recognition of their sustained individual efforts. For Lincoln employee compensation of small salary (40 percentile) and large cash bonus (for a total compensation about 75 percentile) will help the firm to align the firm's goals with employee efforts. Basing the performance on both individual and corporate measures will ensure that all employees are honestly evaluated and truly motivated. The performance measure should move beyond EBIT as self-serving managers can easily manipulate this value.

Even if this is still used as a measurement tool it should be combined with other financial and non-financial measurements that can enhance the appropriateness and ensure accuracy. In 1997 an individual performance element has been added but both the supervisor and employee should develop this. Following some of the above analysis will not only ensure but also enhance the likelihood of Lincoln and their employees achieve their common goals. When designed correctly, incentive schemes stimulate employees to invest wisely, to use assets efficiently, to develop and exploit new opportunities, and to commit themselves to search for ways to improve performance. Everything Lincoln expects of them. Question 14-9 The Revelation Principle in Budget SettingEvaluationElimination of standards The principal paying a salary under conditions in which the manager's input cannot be verified creates a situation where the manager is motivated to renege on the contractual terms of their position (Moral hazard).

Because there is information impacted ness, where managers hold all the important information, there must be a way that Kentville Orchards can obtain this information. There must be a system for Kentville Orchards to use that will measure the effectiveness of the managers. This is achieved by either measuring inputs, or measuring outputs. In essence the contract between Kentville Orchards and their managers is inefficient because they must provide their managers additional compensation for bearing risks.

These risks have been pushed to the managers because there are no standards by which Kentville Orchards can observe of their managers. Basing managerial awards on firm wide versus individual performance can mitigate information impacted ness. This gives the manager more motivation to share information with the firm. Budgets are a commonly used managerial accounting tool which have two primary functions.

First, budgets provide a means of establishing goals through planning and coordinating the firm's activities. Second, budgets serve as a benchmark for evaluating actual performance. Budgetary participation is the process in which subordinates who are accountable for performance under a budget, participate in deciding the budget goals. That the motivational role budgetary participation enhances a mangers trust, sense of control, and involvement with the firm which results in more acceptance of, and commitment to, the budget decisions resulting in improved performance. Budgeting systems are essential facilitators of organizational work processes and its consequential improvement on managerial performance. Thus the most important factor in the functioning of the firms budgetary system is the communication that occurs between the incumbent and the incumbents supervisor.

Kentville Orchards seeks enhanced budgetary communication between managers and their supervisors for two reasons: 1. reduces information asymmetry - managers hold private information regarding their task and task environment, budget goals and strategies for achieving the budget goals. 2. potential positive effects on the managers work attitudes and motivation, and thus job performance When managers attend budget meetings, determining the objectives of the management job, with their immediate supervisor, there is a face-to-face dialogue regarding the budget. These meetings give the supervisory the opportunity to explain the budget decisions and also allows the manager to more fully participate in the budgetary decision making process by allowing the manager to voice their views and opinions. Participatory or 'bottom-up' budgeting is an example of a mechanism adopted by firms to promote employee empowerment and cross-functional interaction. Firms frequently adopt participatory budgeting programs to 'empower' employees by allowing the workforce to set performance targets and allocate resources.