Reference no: EM132820479

A large chemical company is facing problems in one of its manufacturing plants. One is a higher-than-normal rate of accidents that cause costly shutdowns. Another is high turnover, fueled more by the termination of workers than by quits. Plant managers blame the local HR department, which is responsible for hiring and for safety training. The HR staff, in turn, blames the plant's problems on the plant managers. Corporate management decides to include the local HR employees in an incentive plan based on unit-level performance measures specific to each unit (the units are HR and manufacturing in this case).

-To reduce accidents, the company can tie bonuses for HR staff to either or both of two measures: 1. the "training program participation rate", which is the percentage of plant employees who successfully finish a safety training program administered by HR; and 2. "lost workdays", which is the number of workdays lost in the plant due to reported safety violations. Discuss the tradeoffs involved in using each performance measure, using the criteria of controllability and alignment.

-To reduce turnover, the company can tie bonuses for HR staff to either or both of two measures: 1. The number of "days to fill vacancies"; and 2. the "retention rate", which is the percentage of plant employees still employed one year after being hired. Discuss the tradeoffs involved in using each performance measure, using the criteria of controllability and alignment.

Focus on the performance measures; do not discuss the viability of a group incentive plan, which would depend on unmentioned details of the bonus plan.