In the period of rapid economic growth in China in 2006, the chief financial officer of China Resources Corporation was planning to implement several new managerial systems. These systems included inculcating a greater control, increased productivity, improved efficiency, and effective management. The implementation of these new control systems was difficult. The organization was highly diversified and was state-owned. This posed several barriers on the implementation front. The case is based on the integration of new HR systems in a diversified organization. Also, it highlights the advantages as well as the challenges of the incorporation of a formalized balanced scorecard and other organizational performance control systems into an uncertain setting.
1. What is Jiang Wei trying to accomplish with the incentive systems, i.e., performance contracts and EVA-based incentive plans? Does CRC need both incentive systems? Why or why not? Hint: Identify what each system is accomplishing.
2. Would managers behave differently if the performance contract were eliminated? Why not use the EVA-based plan to provide incentives and balanced scorecards to provide information?
3. In the last two paragraphs on page 10 of the case, CRC Chief Financial Officer Jiang Wei identifies his concerns going forward. Do you share his concerns? If so, what recommendations do you have to ensure that CRC does not become too inward focused?