...ANALYZING MANAGERIAL DECISIONS: Structuring Compensation Plans Parkleigh Pharmacy is a small department store in Rochester, NY, specializing in upscale, expensive personal accessories (e.g., sunglasses, beauty aids, leather goods) and home decorations (e.g., crystal, china, table lamps). Kaufmann's is a large department store chain, based in Pennsylvania, with several stores in the Rochester area. Kaufmann's carries a broader range of products and caters more to middle-income consumers. Salespeople at Parkleigh are paid a straight hourly wage (i.e., no sales commissions). In addition, they are entitled to a 30 percent discount on anything they buy at the store. By contrast, salespeople at Kaufmann's are paid an hourly wage (lower than the hourly wage paid at Parkleigh) plus a commission of 5 percent on sales they make. They receive no discount on products they buy at Kaufmann's. Why do you think the compensation plans differ at the two firms? In particular, why do you think Kaufmann's pays commissions to salespeople, while Parkleigh does not? Why does Parkleigh offer employees discounts on purchases, while Kaufmann's does not? One of the reasons for having different compensation plans could be that Parkleigh does not operate under the philosophy that sales incentives drive sales but instead high customer service and friendly staff drives sales especially when selling to higher end customers. Parkleigh may offer the employee discount because they may have the philosophy that...
Words: 744 - Pages: 3
...The Debate over CEO Compensation Analyzing Managerial Decisions: The Debate over CEO Compensation 1. Do you think the fact that most American CEOs are paid so much more than rank-and-file employees suggests CEOs are overpaid? Explain. I do not believe that just because American CEOs are paid much more than rank-and-file employees suggest that they are overpaid. Many CEOs whose salaries and compensation packages are discussed in the news are the CEOs from the largest American corporations and likely do not represent the average American CEO. Also, many times when CEO payouts are discussed in the news it is not a one year payout but instead a multi-year payout. Plus, many companies need to pay high salaries and incentives to attract successful CEOs from other companies. This alone drives the overall salary and compensation packages for CEOs but does not necessary point to them being overpaid. 2. Japanese CEOs generally receive much lower levels of compensation than CEOs in the United States. Does this imply that U.S. CEOs are overpaid? I do not believe that just because Japanese CEOs receive much lower salaries than United States CEOs implies that they are overpaid. I worked for Honda and one item that I learned in the past years is that there are large differences between the American and Japanese cultures. The Japanese very much frown upon employees that leave their companies. Japanese employees barely ever transfer companies unlike American...
Words: 944 - Pages: 4
...Analyzing Managerial Decisions: Structuring Compensation Plans 1. Firms do compensate in different ways, depending on their own strategies, target markets and their own belief of what really is most effective for them. Parkleigh are paid a higher basic salary rate than Kaufmann’s, but Parkleigh employees do not earn any commission like Kaufmann’s employees but they do have an added incentive of in store discount of 30%. As Parkleigh sells in an exclusive market, to affluent consumers, they have taken the stance that they prefer to offer an exceptional high level of service without adding ‘sales pressure’ but providing their employees with a better level of basic salary so that they’d don’t need to sell to make money, instead, be on hand to offer and provide the best level of care as the customers wish, it sometimes benefits firms to pay a slightly higher grade in order to attract personal that provide a better overall service to the company and will have substantially more long term benefits to the firm. It could have also been the case that Parkleigh wants to have a team of people that are slightly older, with a more stable environment and living, that they think aligns better with their business, and these type of employees would see a better basic salary as a better benefit than sales commission, this way of compensation definitely helps attract that type of person. Kaufmann may well be interested more in sales volume rather than service more so and not really too...
Words: 330 - Pages: 2
...Managerial Economics 2010 1. A. Design a simple two-company game that illustrates why it might have been in economic interests of the cigarette companies to support the ban. In designing the game, assume that there is no regulation and that the two firms simultaneously choose between advertising and not advertising. Display your hypothetical payoffs in strategic form (see Figure 9.1) and highlight the Nash equilibrium. Explain the intuition for why the firms in your example would favor regulation to ban advertising. Winston |Advertise |Not Advertise | |fff | | | | | |100/100 |160/60 | | | | | | | | | | |160/60 |150/150 | Profits – Advertising Cost from TV (In millions) Advertise Tareyton Not Advertise During the 1960’s, numerous reports started to surface connecting cancer to smoking...
Words: 2724 - Pages: 11
...DEVELOPMENT. The second major HRM function, human resource development, refers to performance appraisal and training activities. The basic goal of appraisal is to provide feedback to employees concerning their performance. This feedback allows them to evaluate the appropriateness of their behavior in the eyes of their coworkers and managers, correct weaknesses, and improve their contribution. HRM professionals must devise uniform appraisal standards, develop review techniques, train managers to administer the appraisals, and then evaluate and follow up on the effectiveness of performance reviews. They must also tie the appraisal process into compensation and incentive strategies, and work to ensure that federal regulations are observed. Training and development activities include the determination, design, execution, and analysis of educational programs. Orientation programs, for example, are usually necessary to acclimate new hires to the company. The HRM training and education role may encompass a wide variety of tasks, depending on the type and extent of different programs. In any case, the HRM professional ideally is aware of the fundamentals of learning and motivation, and must carefully design effective training and development programs that benefit the overall organization as well as the individual. Training initiatives may include apprenticeship, internship, job rotation, mentoring, and new skills programs. Human resource management (HRM), or human resource development...
Words: 2502 - Pages: 11
...Chapter 1 Introduction to Corporate Finance Week 1 by Hee Soo Lee Learning Goals The basic types of financial management decisions and the role of the financial manager The financial implications of the different forms of business organization The goal of financial management The conflicts of interest that can arise between owners and managers The various types of financial markets 2 Chapter Structure 1.1 The Types of Firms 1.2 Ownership Versus Control of Corporations 1.3 The Stock Market 3 What is Corporate Finance? Three important questions that are answered when you start your own business: - What long-term investments should you take on? (business type, building, machinery, and equipment?) - Where will you get the long-term financing to pay for the investment? (bring other owners or borrowing?) - How will you manage the everyday financial activities of the firm? (collecting from customers and paying suppliers) Corporate finance is the study of ways to answer these three questions Finance can be defined as the art and science of managing money Finance is concerned with the process, institutions, markets, and instruments involved in the transfer of money among individuals, businesses, and governments 4 Legal Forms of Business Organization Three major forms Sole Proprietorship : business owned by a single individual Partnership: business formed by two or more individuals...
Words: 1934 - Pages: 8
...HR Management HR Management: policies, practices and systems that influence an employee’s behavior, attitude, and performance in the attainment of organizational goals HR Activities Strategic HR Management: linking HR function with strategic objectives of the organization in order to improve performance. • Measure HR effectiveness • HR metrics • HR technology (HRMSs) • HR planning Equal Employment Opportunity Compliance with laws Diversity of multicultural and global workforce Employment equity legislation Staffing Job analysis Job description/job specification Selection process Talent Management and Development Orientation Training Career Planning Performance Management Total Rewards Compensation (pay, incentives, benefits) Variable pay programs Health Safety, Security EAPs (Employee Assistance Programs) Health promotion Workplace Security Employee and Labour Relations Employee rights Policies and Procedures Union/Management relations Every manager in an organization does HR functions. Small company: less than 100 employees - shortages of qualified workers, increasing costs, increased wage pressures, increasing competition Medium sized companies: 100 to 500 employees HR Managers work with Operating Managers Management of Human Capital Physical Financial Intangibile Human Human capital/Intellectual capital: collective value of the capabilities, knowledge, skills, life experiences 60% of...
Words: 3215 - Pages: 13
...2 Organizational Behavior An organization consists of individuals with different tasks attempting to accomplish a common purpose. (For a business, this purpose is the creation and delivery of goods or services for its customers.) Organizational behavior is the study of how individuals and groups perform together within an organization. It focuses on the best way to manage individuals, groups, organizations, and processes. Organizational behavior is an extensive topic and includes management, theories and practices of motivation, and the fundamentals of organizational structure and design. From the smallest nonprofit to the largest multinational conglomerate, firms and organizations all have to deal with the concept of organizational behavior. Knowledge about organizational behavior can provide managers with a better understanding of how their firm or organization attempts to accomplish its goals. This knowledge may also lead to ways in which a firm or organization can make its processes more effective and efficient, thus allowing the firm or organization to successfully adapt to changing circumstances. This chapter will help you better understand the theories and structures of organizational behavior. The chapter begins by discussing some of the basic characteristics of managers and management. It then Chapter 18 TLFeBOOK describes some of the popular theories and practical applications related to motivation and helps answer the question “What motivates ...
Words: 5912 - Pages: 24
...manufacturers, aircraft manufacturers, the Department of Defense, beverage makers and bottlers, and appliance manufacturers. This research paper will discuss the issues being faced by Riordan Manufacturing and provides solution based on various motivation, rewards and performance concepts Situation Analysis Issue and Opportunity Identification – Total reward system The current reward system is barely based on performance, instead recognizing cost-of-living increases, seniority and position. Faced with declining morale and work ethic, Riordan managers have been pressuring the CEO to "do something" about the rewards system. Riordan’s employees comprise three major demographic groups. Baby boomers make up the bulk of the managerial and about half of the manufacturing staff; GenXers make up the majority of the professional staff, as well as some of the manufacturing staff; and the GenY contingent are the newest hires, found primarily in manufacturing, engineering and IT. These three groups have radically different perspectives on rewards and motivation, valuing everything from interesting work to bigger paychecks. Stakeholder...
Words: 4909 - Pages: 20
...Journal of Accounting and Economics 31 (2001) 255–307 Empirical research on accounting choice$ Thomas D. Fieldsa, Thomas Z. Lysb,*, Linda Vincentb b Graduate School of Business Administration, Harvard University, Boston, MA 02163, USA Kellogg Graduate School of Management, Northwestern University, Evanston, IL 60208, USA Received 21 January 2000; received in revised form 31 January 2001 a Abstract We review research from the 1990s that examines the determinants and consequences of accounting choice, structuring our analysis around the three types of market imperfections that influence managers’ choices: agency costs, information asymmetries, and externalities affecting non-contracting parties. We conclude that research in the 1990s made limited progress in expanding our understanding of accounting choice because of limitations in research design and a focus on replication rather than extension of current knowledge. We discuss opportunities for future research, recommending the exploration of the economic implications of accounting choice by addressing the three different reasons why accounting matters. r 2001 Published by Elsevier Science B.V. JEL classification: M41 accounting Keywords: Capital markets; Accounting choice; Voluntary disclosure; Accounting judgments and estimates; Earnings manipulation $ We are grateful for comments received from Ronald Dye, participants of the 2000 Journal of Accounting and Economics conference, the editors Ross Watts and Douglas...
Words: 25194 - Pages: 101
...Manager –Someone who coordinates and oversees the work of other people so that organizational goals can be accomplished. • First-line Managers – Individuals who manage the work of non-managerial employees. • Middle Managers – Individuals who manage the work of first-line managers. • Top Managers – Individuals who are responsible for making organization-wide decisions and establishing plans and goals that affect the entire organization. 5 6 What Is Management? Classifying Managers • Managerial Concerns –Efficiency • “Doing things right” –Getting the most output for the least inputs –Effectiveness • “Doing the right things” –Attaining organizational goals 7 8 What Do Managers Do? Exhibit 1–2 Effectiveness and Efficiency in Management 9 Managerial Roles 10 What Managers Actually Do • Interaction – with others – with the organization – with the external context of the organization • Reflection – thoughtful thinking • Action – practical doing • Management Roles Approach (Mintzberg) – Interpersonal roles • Figurehead, leader, liaison – Informational roles • Monitor, • Disseminator, • Spokesperson – Decisional roles • Disturbance handler, resource allocator, negotiator 11 12 Key managerial skills Key managerial skills – Technical skills • Knowledge and...
Words: 9830 - Pages: 40
...interrelationship between the different processes and functions of the organization Introduction * Lecico is one of the world’s largest sanitary ware manufacturers and a significant tile producer in Egypt and Lebanon. With over 50 years of operation, Lecico has developed into a major exporter by producing competitively priced sanitary ware to exacting European quality standards. * Today, Lecico is one of the largest suppliers of sanitary ware to Europe and the Middle East. A business process * Is a collection of related, structured activities or tasks that produce a specific service or product for a particular customer or customers It may often be visualized as a flowchart of a sequence of activities with interleaving decision points or as a Process Matrix of a sequence of activities with relevance rules based on data in the process. How do Organizations Improve? * Major changes must start at the top * Ultimately, everyone must be involved * Effective change requires a goal and knowledge of the current process * Change is continuous * Change will not be retained without effort and periodic reinforcement * Improvement is continuous Why Business Process Management? * Symptoms of Poor Business Process Management and Design * No standard process/method for addressing how to define business requirements and when to improve business processes * When automation of processes is commissioned, “Business”...
Words: 4109 - Pages: 17
... Submitted by:- Deepti Sangal A3906413295 BBA (G) C-08 Research objective • To know what are the reasons of employees for leaving the organization. • To validate weather compensation is the central aspect behind employee retention or any other reason. • To study which are the factor which cause employee turnover. • To study what are the methods which are adopted to retain people. Literature review Retention is an obscure notion & there would be not any single recipe for observance employees with a company. Employees who are satisfied have...
Words: 3096 - Pages: 13
...Chapter 12 Enhancing Decision Making LEARNING OBJECTIVES After reading this chapter, you will be able to answer the following questions: 1. What are the different types of decisions and how does the decision-making process work? 2. How do information systems support the activities of managers and management decision making? 3. How do decision-support systems (DSS) differ from MIS and how do they provide value to the business? 4. How do executive support systems (ESS) help senior managers make better decisions? 5. What is the role of information systems in helping people working in a group make decisions more efficiently? CHAPTER OUTLINE 12.1 DECISION MAKING AND INFORMATION SYSTEMS Business Value of Improved Decision Making Types of Decisions The Decision-Making Process Managers and Decision Making in the Real World 12.2 SYSTEMS FOR DECISION SUPPORT Management Information Systems (MIS) Decision-Support Systems (DSS) Data Visualization and Geographic Information Systems Web-Based Customer Decision-Support Systems Group Decision-Support Systems (GDSS) 12.3 EXECUTIVE SUPPORT SYSTEMS (ESS) AND THE BALANCED SCORECARD FRAMEWORK The Role of Executive Support Systems in the Firm Business Value of Executive Support Systems 12.4 HANDS-ON MIS PROJECTS Management Decision Problems Improving Decision Making: Using Pivot Tables to Analyze Sales Data Improving Decision Making: Using a Web-Based DSS for Retirement Planning LEARNING TRACK MODULE Building and Using Pivot Tables Interactive...
Words: 17503 - Pages: 71
...Course Overview The objective of the subject is to make students conversant with a set of management guidelines which specify the firm’s product-market position, the directions in which the firm seeks to grow and change the competitive tools it will employ, the strengths it will seek to exploit and the weaknesses it will seek to avoid. Strategy is a concept of the firm’s business which provides a unifying theme for all its activities. Course Syllabus Group I: Defining Strategic Management, Characteristics of Strategic Management Types and Hierarchy, Formulation of Strategy: Various Stages and Components of Strategic Management, Determination of various objectives like corporate, divisions and departmental objectives: Vision, Mission and Purpose, Environmental Scanning: Internal & External environment, Types of Strategies, Guidelines for crafting strategies, Tailoring strategies to fit specific Industry. Group II: Strategic Analysis and Choice: Environmental Threat and Opportunity Profile (ETOP), Organizational Capability Profile – Strategic Advantage Profile, Corporate Portfolio Analysis – SWOT Analysis, Synergy and Dysergy – GAP Analysis, Porter’s Five Forces Model of Competition, Mc Kinsey’s 7s Framework, GE 9 Cell Model, Distinctive competitiveness – Selection of matrix while considering all models discussed above, Implementation of strategy: Analysis and development of organizational policies-marketing, production, financial, personnel and management...
Words: 11813 - Pages: 48
