China Express owns a number of stores that sell fast food. As part of its compensation packages, China Express provides employees with bonuses based on customer satisfaction surveys. Recent analysis of the data shows a positive correlation between survey ratings and sales; that is, as customer satisfaction increases, sales increase. However, at a certain point in this trend, sales plateau even though the ratings continue to increase. In addition, increasing customer satisfaction causes costs to also increase because more time is spent with each customer and more employees are on hand to help with food preparation and cashiering to reduce the time that customers wait for their food to be prepared. Other factors that appear to affect customer satisfaction are the general cleanliness of the store and the attitudes of the cashiers as they provide customer service. A factor that strongly affects sales at each store is its county health department rating. These ratings are published in the local daily newspaper. When a store has a low rating, sales at that outlet drop off until publication of an improved rating occurs. The owner wants to add one or more financial performance measures to the bonus package so that employees will earn more money when customer satisfaction increases at the same time that financial performance is also increasing.
A. Describe advantages and disadvantages of using a combination of performance measures reflecting the customer and financial perspectives.
B. Management would like to add other customer-related measures and is considering replacing survey satisfaction with some other measure. List one potential measure and list at least one advantage and one disadvantage for it.
C. List one additional performance measure that could be included in the compensation package. Explain the measure and how it might affect incentives.