Harwood Medical Instruments PLC (HMI), based just outside of Birmingham, England, manufactured specialty medical instruments and sold them in market niches that were becoming increasingly competitive and price sensitive because of pressures to reduce health care costs. HMI was organized into nine decisions each run by a general manager. Over the years, HMI had grown both organically and by acquisition. Six of the divisions had been acquired by HMI within the past decade.
All of HMI’s divisions sold medical products to hospitals, laboratories, and/or doctors, so the need for product quality and reliability was high. The divisions varied significantly, however, in terms of the degree to which their success depended on, for example, development of new products, efficiency of production, and/or customer service.
Bonuses for division general managers were paid semi-annually. Up to the year 2009, these bonuses were calculated as 1% of division operating profits.
HMI’s managing director, Andy Guthrie, had concerns though that the operating profit measure was too narrowly focused. He had been reading articles about performance measurement and decided to a “more balanced” scorecard. In November 2009, just before introducing a new bonus plan, Mr. Guthrie explained to his chief financial officer that he was willing to pay out higher bonuses than had been paid historically if improved performance warranted doing so.
The new plan provided a base bonus for division general managers of 1% of division operating profits for the half-year period. This base bonus was adjusted as follows:
· Increased by £5,000 if over 99% of deliveries were on time; by £2,000 if 95-99% of deliveries were on time; or by zero is less than 95% of deliveries were on time.
· Increased by £5,000 if sales returns were less than or equal to1% of sales, or decreased by 50% of the excess of sales returns over 1% of sales.
· Increased by £1,000 for every patent application filed with the UK Intellectual Property Office.
· Reduced by the excess of scrap and rework costs over 1% of operating profit.
· Reduced by £5,000 if average customer satisfaction ratings were below 90%.
If the bonus calculation resulted in a negative amount for a particular period, the manager received no bonus. Negative amounts were not carried forward to the next period.
Exhibit 1 shows results for two representative HMI divisions for the year 2010, the first year under the new bonus plan. The Surgical Instruments Division (SID), one of HMI’s original businesses, sold a variety of surgical instruments, including scissors, scapels, retractors, and clamps. The markets for these products were mature, so growth was relatively slow. Not much innovation was needed, but controlling costs was critical. The Ultrasound Diagnostic Equipment Division (Ultrasound), which was acquired in 2007, sold and serviced ultrasound probes, transducers, and diagnostic imaging systems. The ultrasound market promised excellent growth and profits if the division could keep its sophisticated products on the cutting edge technologically and control both product development and product costs effectively.
In 2009, the total annual bonuses for the year earned by the managers of SID and Ultrasound were approximately £85,000 and £74,000, respectively.
Exhibit 1 Harwood Medical Instruments PLC
Operating results for the surgical Instruments and Ultrasound Diagnostic Equipment Divisions, 2010 (£ in 000s)
|Surgical Instruments Division||Ultrasound Diagnostic Equipment Division
|1st half of 2010||2nd half of 2010||1st half of 2010||2nd half of 2010|
|Patent applications filed||0||1||4||8|
|Scrap and rework costs||£51.1||£45.0||£39.7||£28.2|
|Customer satisfaction (average)||78%||89%||81%||91%|
1. Critically analyze the current reward system that Harwood Medical Instruments PLC uses to award the bonus.
2. Calculate the bonus earned by each manager of the two Divisions for each 6-month period and for the year 2010 (i.e. total bonus) [Note: the figures are in thousands; (£’000s)].
3. (i) Design a performance measurement reward system that would encapsulate a rather “more balanced” approach in awarding of bonuses.
(ii) Briefly explain how the reward system you design in 3(i) can be used to award bonus.
Exemplary Academic Writing Service
At TheQuizlet.com, you are guaranteed of quality service from our professional writers. We maintain consistent communication with customers after placing an order to avoid missing anything that may compromise the quality of delivered work.
Our hiring process is rigorous to maintain the desired quality that has become the core of our business. We expose potential writers to an uncompromising selection process that enables TheQuizlet to pick the best out of the rest. TheQuizlet boasts of a competent team of writers, editors, and professors who work towards accomplishing your goals.
TheQuizlet has an in-house plagiarism software that lowers the probability of delivering plagiarized papers to our clients. Referencing is guided by the format specified by a customer when placing an order. Our writers are conversant with all referencing formats that include APA, MLA, Chicago, Harvard, and Vancouver among others.
24/7 Customer Support
We understand the importance of effective communication and as such, TheQuizlet has a dedicated customer support department that responds to all client needs. You can easily contact our team through a chat window at the bottom left corner. Additionally, clients can reach us through support’s email or a telephone number available on our contact page. Feel free to contact us at any time and our team of experts will solve all your problems.
Swift Delivery and 100% Money-back Guarantee
When placing an order, ensure that you specify the correct deadline to help our writers work around the provided timeline. At TheQuizlet, we deliver our tasks before the projected deadline to give time for the customer to proofread the work before submission. In the event we cannot deliver a paper on time, we initiate contact with the client to renegotiate a new deadline.
Unlimited and Free Revisions
We urge all our customers to request for a revision whenever they identify a need to amend the paper. Since we understand your concerns, TheQuizlet.com does not charge for revisions. Nonetheless, we encourage customers to be genuine when requesting for revisions.
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
TheQuizlet is a one-stop shop for all your writing needs. We tackle each customer’s needs differently to improve the quality of outcomes and meet your expectations.
TheQuizlet is committed to delivering quality work on time to ensure our clients get the value for their money.
Admission Essays and Professional Writing
Admission essays are personal, as opposed to other papers. For this reason, our team will request for any information that will enable them to deliver quality work, which allows you to convince the admissions board on why you should be granted the application.
Editing and Proofreading
Our team comprises of qualified researchers, writers, and editors who go through the different papers before delivering them to our clients. Whether your paper is being written from scratch or you want it to be edited, you can trust TheQuizlet for all your needs.
After receiving the final draft, you can request for a revision to incorporate various changes that are aligned with your expectations. All our papers are written in line with the latest writing standards.