Week 5
Week 5
– Motivational contracts
§ To define the links between results and various
organizational incentives
1.
3. Negotiation
I
ss
2.
ua
I
nit
nc
ial
e
Budget
of
Bu
Department
G
dg
uid
et
eli
Pr
ne
op
4. Approval
s
os
al
Bottom-Up
Business Managers
n Fixed/Flexible
– Should managers be held accountable for achieving their plans
regardless of the business conditions they face?
– Relative performance targets.
Value Target
Cost
SH Target
Value Profit
Competency
Gap
Current
Competence
Estimated
Resources
Cost
Future
Competence
Bus 424 fifth lecture presentation 14
Budget participation
n Top-down/bottom-up budgeting
Easy Impossible
Goal Difficulty
1. Sales
3. Profits
5. ROE
Production Budget
S&A expense
budget
Capital Budget
Cash budget