Reference no: EM132295521

Purpose of Case: The Catalytic Solutions, Inc. (CSI) case was written to motivate a class discussion about some issues commonly related to the design of performance measurement and incentive systems in young, growing firms. The subject firm in this case is privately held, is still in a “pre-profit” situation, and is preparing itself for an IPO in, hopefully, the not-too-distant future. The case describes the company, its competitive advantages and strategy, and the elements of its employees’ compensation package. For at least some employees, this package includes three elements: salaries, stock options, and an annual bonus. What is particularly interesting about the compensation package is that the firm’s annual bonus plan bases rewards primarily on non-financial measures of performance. This is not like the bonus plans used in most larger, more established firms, in which bonus awards are based primarily on financial measures of performance. In this case, CSI’s VP-Finance & Administration is quoted as saying that he doubts that financial measures would ever be mor important than the non-financial measures in this plan. Thus, the case can be useful for motivating a class discussion on the role of non-financial measures in incentive systems as substitutes for, or complements to, financial measures. Questions Evaluate the CSI performance measurement and compensation systems. What changes would you suggest be made to these systems, if any? Explain. Fast-forward 10 years. Assume that CSI has been successful. It is now a much larger, public company. It has three operating divisions (investment centers) that focus on different markets. What would you expect the CSI measurement and compensation systems to look like at that time? Why?