High Performance is Important (and So is How You Get There) Citigroup's new chief executive, Michael Corbat, is beginning his tenure with an adage made famous by Peter Drucker and others: If you can't measure it, you can't manage it. His goal is to do a better job of measuring and tracking company performance and also performance of individual executives. For example, if an executive's performance plan calls for him/her to accomplish a specific objective, Mr. Corbat wants to have a clear answer as to whether that happened and he believes his new performance management system will provide that. The new system is an example of a balanced scorecard. A major purpose is to measure and track not only bottom-line financial performance, but also how that performance is achieved. In the case of Citigroup, Mr. Corbat has proposed five performance dimensions for the scorecard: Capital, Clients, Controls, Costs, and Culture. Capital and Costs pertain to the bottom-line. However, Clients and Culture pertain to client and employee stakeholders. The Controls dimension of the scorecard is especially important in the financial industry where risky behaviors have caused huge problems for companies and for the economy. In the past, Citigroup chief executives focused on narrower goals, which may have contributed to excessive risk taking. For example, Sanford Weill famously proclaimed that he would double the company's earnings every five years. Charles Prince, chosen by Weill as his successor, focused on aggressively increasing market share. The danger of having aggressive financial goals, without any consideration of how they are to be achieved, is that too great risks may be taken and/or unethical behavior may occur, both of which can come back to do great harm to the company over time. The new system, with both financial and nonfinancial measures of performance, will be used to evaluate Citigroup's top 50 executives. The highest possible performance score is 100%, while the lowest is minus 40%. The hope is that by linking pay incentives to this broader set of performance objectives, not just to financial goals as in the past, Citigroup will achieve better financial performance over time and achieve it in a less risky manner. Nobody wants to go through another financial industry meltdown and this is one part of the plan to avoid that. 5 As another example of how firms use executive pay scorecards to direct and focus behavior toward not only financial, but also important nonfinancial goals, Walmart will begin to make executive pay depend, in part, on how successful the retailer is in fixing its compliance performance, a process spurred by a federal investigation into bribery allegations in Mexico. At issue is whether Walmart violated the Foreign Corrupt Practices Act, including allegations that Walmart bribed officials in Mexico to gain approval for store openings there. Prior to the addition of compliance performance as a criterion in setting executive pay, Walmart relied primarily on financial criteria such as sales, operating income, and return on investment. Success in satisfying workforce-diversity goals was also a factor in executive compensation. Under the new executive pay plan, Walmart's audit committee can reduce or even eliminate incentives for top executives if the company does not satisfy compliance objectives, including, according to the company's proxy statement, implementing enhancements to how we report and investigate allegations of wrongdoing world-wide. Executives will be required to provide quarterly reports to the audit committee to allow tracking of progress toward compliance goals, which will be measured on dimensions such as standards and controls, training, and monitoring.

Question

If this alternative course of action was adopted by the workplace, have resulted in the outcome. Is the theory too simplistic? Is the theory too complicated? Is it reasonable for contemporary businesses to apply the action suggested by the theory?