SPM Case Tsinghua Tongfang Co. Ltd

Management Control System Case Tsinghua Tongfang Tongfang Co. Ltd Questions.

1. Evaluate Evaluate the Tsi Tsinghua nghua tongfang tongfang Control, Control, performance performance evaluati evaluation on and incentive incentive system. system. What changes would you suggest, if any? 2. Should Company implement implement the the proposed proposed employe employeee stoc stoc option option plan? plan? Answers.

1. Tsinghua Tsinghua Tong Tongfang fang !T"T#$ !T"T#$ mainly use result result control control method to create create its control control system. system. T"T# T"T# had had a rela relati tivel vely y well well deve develo lope ped d and o%&ec o%&ecti tive ve perfo perform rman ance ce meas measure ureme ment nt,, evaluatio, and incentive system. 't has good control system and made a different with other company in china significant %onuses also were offered to most otf the company management level employees %ased on performance measured in terms of ()'. This system can increase motivation and drive the %est performance of management level employee to wor. Evaluation of T"T# performance evaluation system a. Evaluation Evaluation system system %ased %ased on a series of of &udgement &udgement rather rather than *uatified *uatified criter criteria, ia, which which result in a less o%&ective assessment system. The lac of e+plicitness will impose ris  on employees due to %ias or favoritism.  %. Company value e*ually to the five different aspects. ut the truth is, T"T# values  performance more than any other aspects. This will result in confusion when communicating to employees. T"T# can emphasi-e less on o%edience and discipline and weight more a%out performance performance and nowledge part, which can help employees employees understand what is e+pected of them. c. The result resultss of perform performance ance evaluat evaluation ion is not lined lined with T"T# T"T#ss incenti incentive ve system. system. T"T# T"T# should should have have an e+plici e+plicitt policy policy or criter criteria ia in determ determini ining ng the relati relations onship hip  %etween performance and reward. Evaluation of T"T#s incentive system The discretionary %onus is /almost guaranteed,0 and this will mae employees %ecome less ris tolerant. sually, the discretionary %onus is a form of varia%le pay, and it is the decision of employer on the amount, re*uirements and timing of the %onus. Employers shouldnt disclose the %onus in ahead. ut in T"T#, it has already %ecome an e+pectation of employees, or even a guaranteed part of salary. 't has lost the incentive purpose. nd the last T"T# lac of policy in allocating the %onus pool. Suggestions3

Company should implement this incentive system also to the lower4level4employee to encourage them to wor %est to. nd the last suggestion is company should implement stoc option plan when it is legali-ed %y the Chinese 5overment 2.

6es, %ecause if they were a%le to grant options, T"T# managers e+pected that they would reduce the si-e of the %onus potentials to eep the total compensative, %ut not e+cessive. uth they also wanted ey T"T# employees to share in the companys success. They thought that an option program, particularly, whould %e important in attracting ang retaining talented employees to T"T# and in rewarding them for their effort.