Kenneth Merchant

This study uses both archival and field evidence from one multidivisional firm to examine how the three commonly used financial performance standards used to calibrate short-term bonus payouts—thresholds, targets and maximums—are set. The setting of the standards results from complex negotiating processes. Consistent with prior research, we find that performance targets—the middle parameter—are set to be exceeded by most organizational entities. Contrary to some existing normative theory, actual performance is often outside the incentive zone, which is defined by the range between the maximum and threshold. The reasons for this include desires to raise managers’ aspiration levels, concerns about bonus payment affordability, and trade-offs in gaining manager commitment to the standards. Often the target is not in the middle of the incentive zone. We identify three additional factors that provide partial explanations of where and why these standards are set where they are: employee risk mitigation, desire for cross-entity equity, and manager operating style.

Basic management accounting text that can be used with both undergraduate and graduate students.

Basic management accounting text that can be used with both undergraduate and graduate students.

This case describes the implementation approaches and challenges faced by managers at Microsoft Corp. in implementing a broad-scale Corporate Social Responsibility (CSR) Program. The impetus for the program came from the company’s CEO, Satya Nadella. The perceived benefits of the program are described in the case. The case focuses on four major elements of the CSR program: environmental sustainability, accessibility, responsible sourcing (for both direct and indirect supplies), and human rights. These areas are at varying stages of development. Most importantly, these sub-programs have quite different execution strategies. Students are asked to understand what causes this variance in approaches. Program areas where success is easy to measure rely heavily on comparing actual outcomes with pre-set goals. Those where success is more difficult to measure tend to rely heavily on other tools, such as detailed policies and procedures, codes of conduct, and training. All of the CSR programs benefit from having employees who believe strongly in the cause and a supportive corporate culture.