Question: Brett Gostkowski seeks your advice on revising the existing bonus

Brett Gostkowski seeks your advice on revising the existing bonus plan for division managers of World Information Group. Assume division managers do not like bearing risk. Gostkowski is con-sidering three ideas:
• Make each division manager’s compensation depend on division RI.
• Make each division manager’s compensation depend on company- wide RI.
• Use benchmarking and compensate division managers on the basis of their division’s RI minus the RI of the other division.

Required
1. Evaluate Gostkowski’s three ideas using performance- evaluation concepts described in this chapter. Indicate the benefits and drawbacks of each proposal.
2. Gostkowski is concerned that the pressure for short- run performance may cause managers to cut corners. What systems might Gostkowski introduce to avoid this problem? Explain briefly.
3. Gostkowski is also concerned that the pressure for short- run performance might cause managers to ignore emerging threats and opportunities. What system might Gostkowski introduce to prevent this problem? Explain briefly.


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  • CreatedJanuary 15, 2015
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