Bus 630 Week 5 Dq 2 Perverse Affects of Some Performance Measures

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Complete the following exercise and provide a recommendation for each of the four scenarios presented.  There is often more than one way to improve a performance measure. Unfortunately, some of the actions taken by managers to make their performance look better may actually harm the organization. For example, suppose the marketing department is held responsible only for increasing the performance measure "total revenues," Increases in total revenues may be achieved by working harder and smarter, but they can also usually be achieved by simply cutting prices. The increase in volume from cutting prices almost always results in greater total revenues; however, it does not always lead to greater total profits. Those who design performance measurement systems need to keep in mind that managers who are under pressure to perform may take actions to improve performance measures that have negative consequences elsewhere.  For each of the following situations, describe actions that managers might take to show improvement in the performance measure but which do not actually lead to improvement in the organization's overall performance.

    • Concerned with the slow rate at which new products are brought to market, top management of a consumer electronics company introduces a new performance measure--speed-to-market. The research and development department is given responsibility for this performance measure, which measures the average amount of time a product is in development before it is released to the market for sale.
    • The CEO of a telephone company has been under public pressure from city officials to fix the large number of public pay phones that do not work. The company's repair people complain that the problem is vandalism and damage caused by...