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Hi Gromit,
Could you help to split the answer below into 6 marks? I think the answer only worth 3 marks base on my splitting method below.
Please teach me.
1. The existing remuneration system is primarily based on the division’s performance compared to budget. It is likely that the management style will be highly cost conscious and conservative as a result. This would be appropriate for the bar and restaurant divisions which foresee low growth.2. However, this could present particular problems for the divisions that are or could be grown (cafes and clubs). They will require a more entrepreneurial managerial approach and, therefore, should be using long-term profit measures of performance in order to align the manager’s motivation with the business unit’s needs.
3. The chairman is also correct to be concerned about the broad measure of divisional performance (EVA™) and whether this is coherent with the budgetary approach to management reward in the divisions. There is the possibility that if the budgets are not set in order to maximise EVA™ then the overall objectives are not reflected in the reward system at divisional level
The existing remuneration system is primarily based on the division’s performance compared to budget. It is likely that the management style will be highly cost conscious and conservative as a result. This would be appropriate for the bar and restaurant divisions which foresee low growth. However, this could present particular problems for the divisions that are or could be grown (cafes and clubs). They will require a more entrepreneurial managerial approach and, therefore, should be using long-term profit measures of performance in order to align the manager’s motivation with the business unit’s needs.
The chairman is also correct to be concerned about the broad measure of divisional performance (EVA™) and whether this is coherent with the budgetary approach to management reward in the divisions. There is the possibility that if the budgets are not set in order to maximise EVA™ then the overall objectives are not reflected in the reward system at divisional level
Well, I think the way you have split the paragraphs would suggest about 2 marks per para as each says 2 things. For example, para 1:
The existing remuneration system is primarily based on the division’s performance compared to budget. It is likely that the management style will be highly cost conscious and conservative as a result (1 mark). This would be appropriate for the bar and restaurant divisions which foresee low growth (1 mark)
. 1 mark for analysing the current style and its pro-conservative stance then 1 mark for suggesting that this would be appropriate for bar and restaurant divisions which need to watch their costs rather than go for expansion.
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