Subject category:
Finance, Accounting and Control
Published by:
IESE Business School
Version: July 2007
Revision date: 11-Jun-2014
Abstract
A product manager of a large automobile supplier has to decide whether to reduce by 25% the price of a component for a large automobile manufacturer. Production has not started yet, but substantial resources have been put into place. On the other hand, the customer is key to the company's strategy. Lastly, the information system does not clearly measure the economic impact of the decision. Will Morgan Components be better off accepting the contract? The product manager will be judged according to accounting numbers, and these might look bad if he accepts... even if the company is better off. This lack of alignment can be used to discuss goal congruence in designing information and compensation systems.
Location:
Subject category:
Finance, Accounting and Control
Published by:
IESE Business School
Version: 10.27.05
Length: 19 pages
Data source: Field research
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Abstract
A product manager of a large automobile supplier has to decide whether to reduce by 25% the price of a component for a large automobile manufacturer. Production has not started yet, but substantial resources have been put into place. On the other hand, the customer is key to the company's strategy. Lastly, the information system does not clearly measure the economic impact of the decision. Will Morgan Components be better off accepting the contract? The product manager will be judged according to accounting numbers, and these might look bad if he accepts... even if the company is better off. This lack of alignment can be used to discuss goal congruence in designing information and compensation systems.
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Location:
Related
Subject category:
Finance, Accounting and Control
Published by:
IESE Business School
Version: 10.27.05
Length: 19 pages
Data source: Field research