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Other Financial Management Techniques - Essay Example

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Other Financial Management Techniques

The implementation of wrong performance measures would mean that the management has not allocated balanced weight-ages to all these four areas of organizational goals in order to link it to the compensation structure of the employees. The tying of wrong performance measures to the compensation of the employees would mean that it has the likelihood of giving rise to unethical behaviour among the workers and the employees in the manufacturing plants (Tonchia and Quagini, 2010). The examples of wrong performance being tied to compensation include the aspects in which the performance of the employees is linked only with the volume of output with ignorance in the quality of the finished products being produced by the companies. The management often pays more attention to the volume of output and overlooks the quality of the product being offered in the market. Thus linking the compensation structure with such performance measure could lead the employees to adopt short-cut procedures in the process of manufacturing. This would give rise to unethical behaviour among the employees and they would engage in work activities that would allow them to produce more products in the manufacturing process. The concentration solely towards the volume of output may lead to procurement of high amount of raw materials and inventory but the service level of the workers may suffer. This has been shown by the graph given below. The companies may not track important and quality contribution of the employees and may not give reward such activities of the workers are example of wrong performance measures being linked to compensation. This would lead to the decline of the quality of the work in the production unit and unethical behaviours may surface where the employees would be driven to get incentive without meeting the requirements of product quality, service level to the customers, etc. It would also lead to unethical behaviours of performing in such a way that fulfils the short term interests of the employees to get more compensation but compromises on the goals of the organization in terms of meeting the quantity and quality level for several business contracts. Steps of EEC: avoidance of unethical behaviour The Eddison Electronics Company (EEC) is required to active steps for avoiding unethical behaviour in the manufacturing units that produces several electronic items. In order to avoid unethical behaviour, EEC would be required to link the compensation of the employees with the right performance measurement measures. In order to do this, EEC would need to assess the short term and long term goals of the company and the deadlines to be met in terms of the contracts to be delivered over the period of time. This would enable EEC to understand the exact requirement from their workforce or the output required from the workforce in terms of both volume of the output and the quality of service to their customers. EEC would need to link the compensation of the workforce with the various areas like financial targets of the company, customer service to be delivered, the internal benchmarks of product innovation, quality and steps to maintain high service level for the customers and the initiatives to be taken to maintain a culture for the growth of ...Show more

Summary

Other Financial Management Techniques Effects of wrong performance measures tied to compensation The effects in the case of wrong performance measures being tied to compensation in the organization have been explained as follows. The level of compensation offered to the employees should take into account the performance in not only one particular area of service especially in case of manufacturing units…
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