Hcc Case Essay

633 Words3 Pages
1. What is the company’s management structure?
The company is divided into four operating divisions (Glasseal, Hermetic Seal, Hermetite and Sealtron) , each of which is run completely independent by a general manager. These managers are responsible for the whole business operated in their division except for the control function, which is run by the division controllers who report directly to Chris Bateman, the CFO. The reason why control is separated from everything else is to ensure that there is autonomy and objectivity on the controller’s judgments: if they were reporting to the division managers and earning bonuses on the same basis than them, they would have an incentive to window dress the accounts and report a better situation
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By contrast, the new budget system is based on a minimum performance standard (MPS philosophy) which has to be reached in order to start earning extra rewards, trying at the same time to ensure that these standards are realistically set by the division managers making them definitely achievable. Then, above this first and sure performance standard, managers have to set targets that represent ordinary performance levels with a 50% probability of achievement.
This way, it can be possible to distinguish between different levels of performance (standards), which had associated different extra compensations if achieved.
Bonuses were also allocated in a different way: in the old system, workers included in the bonus plan were assigned a bonus potential according to which additional rewards were paid depending on profit before taxes (PBT) and personal performance. Therefore, bonus were assigned on the basis of two kinds of measures: an objective measure (no bonus were paid if the PBT was below the 60%) and a subjective judgment (performance was evaluated by the top management in the basis of target accomplishment). By contrast, in the new system the incentive compensation plan was different depending on the difficulty of the standards. Additionally, a bonus pool was created for each division composed by a 20% of the amount that the division’s

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