Aligning Performance Goals and Incentives

3 Pages
Unlock Document

Financial Accounting
Prof.Jan Klakurka

MGTD54 Wk 9 Notes Ch.11 – Aligning Performance Goals and Incentives Nature of Performance Goals - goal formal aspiration that defines level of achievement - specify ends and means which to achieve them Goals, Objectives, Targets Goals: general aspirations Objectives/Targets: measurement stds and time frames to gauge progress - measurement attached to set of aspirations Performance goal: desired level of accomplishment against actual results measured Purpose of Performance Goals - diff ways of generating financial returns w/o clarity of purpose - communicates bus direction to subordinates - each measure (rev growth, store openings, exp reduction, price vs comp) communicates diff set of priorities - enhance ROM - subordinates infer strategic direction top mngrs wish to follow - frees up top mgmt attention to focus on other things - signal preferences: where ppl should dedicate their time - disciplined approach to mgmt working through others - communicate prospects of the business with stockholders and analysts Critical Performance Variables - factors must be achieved for intended strategy to succeed 1. work deductively to identify performance drivers Performance drivers: variables (1) influence prob of strategy successful implementation (2)provide largest potential for marginal gain over time 2. identify critical performance variables from list of performance drivers Any performance variable that could cause strategy to fail Selecting Performance Measures Measure: quantitative value that can be scaled and used for purposes of comparison -financial measures: monetary terms - nonfinancial measures: quantitative data outside formal accounting system Three tests to determine if measure is suitable to support performance goal: 1. Align with strategy: measures tell what important 2. Measured effectively : obj, complete, responsiveness 3. Measure Linked with Value: output measures (lagging) show econ value created, input and processmeasures valid in managers understand cause-and-effect relationships Nature of Measures (2) Objective measure: independently verified, little ambiguity - subjective measures rely on supervisor supervision Complete measure: captures all relevant attributes of achievement i.e. share price Responsive measur
More Less

Related notes for MGAD40H3

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.