8155 - PERFORMANCE EVALUATION AND INCENTIVES

This course focuses on performance evaluation and incentive systems, as key management mechanisms that help all but some of the smallest organizations motivate employees to produce the outcomes the organization wants. More specifically, it focuses on financial performance evaluation and incentives, which dominate in importance at managerial levels. However, it also provides a broader framework to put the financial controls in proper perspective.
All students interested in business or management can benefit from attending the course. However, the contents provided are particularly useful for those who are, or aspire to be managers, management consultants, financial specialists (for example controller, financial analyst, auditor), or human resource specialists (for example personnel director, compensation consultant).

• Performance measurement and evaluation systems (results control) as compared to other forms of control (action and personnel/cultural controls).
• Financial performance measurement systems as important types of results control: financial responsibility structures and alternate financial performance measures.
• Performance-dependent rewards/incentives (and punishments): forms of rewards and punishments, monetary rewards, group rewards, links between rewards and results, criteria for evaluating reward systems.
• Causes and remedies of the most common and serious management control-related problems: the tendency of accounting measures to cause managers to be excessively short-term oriented (myopic), the tendency for return-on-investment measures of performance to cause bad investment and performance evaluation decisions, and the likelihood of negative behavioural reactions from managers who are held accountable for factors over which they have less than complete control.
• Key organizational control roles, including those of controllers, auditors, and audit committees of the board of directors and common management control-related ethical issues.
• Contextual factors such as environmental uncertainty, organizational strategy and multinationality that have significant effects on both the choices of performance measurement, evaluation and incentive systems and their effectiveness in specific settings.

Attending students
The evaluation will be based on two different basic elements. One element is represented by a written exam at the end of the course (70%). The second element derives from the presentation and discussion of homeworks/case studies in class (30%).

Non attending students
The evaluation will be based on a written exam.

• A.K. MERCHANT, W.A. VAN DER STEDE, Management Control Systems - Performance Measurement, Evaluation and Incentives, Prentice Hall, 2003.