Terry Travers is the manufacturing supervisor of the Aurora Manufacturing Company, which produces a variety of plastic products. Some of these products are standard items that are listed in the company’s catalog, whereas others are made to customer specifications. Each month, Travers receives a performance report displaying the budget for the month, the actual activity for the period, and the variance between budget and actual. Part of Travers’ annual performance evaluation is based on his department’s performance against budget. Aurora’s purchasing manager, Bob Christensen, also receives monthly performance reports and is evaluated in part on the basis of these reports. The most recent monthly reports had just been distributed, on the 21st of the month, when Travers met Christensen in the hallway outside their offices. Scowling, Travers began the conversation, “I see we have another set of monthly performance reports hand delivered by that not very nice junior employee in the budget office. He seemed pleased to tell me that I was in trouble with my performance again.” Christensen: “I got the same treatment. All I ever hear about are the things I haven’t done right. Now, I’ll have to spend a lot of time reviewing the report and preparing explanations. The worst part is that the information is almost a month old, and we spend all this time on history.” Travers: “My biggest gripe is that our production activity varies a lot from month to month, but we’re given an annual budget that’s written in stone. Last month, we were shut down for three days when a strike delayed delivery of the basic ingredient used in our plastic formulation, and we had already exhausted our inventory. You know that, of course, since we had asked you to call all over the country to find an alternate source of supply. When we got what we needed on a rush basis, we had to pay more than we normally do. ”Christensen: “I expect problems like that to pop up from time to time— that’s part of my job—but now we’ll both have to take a careful look at the report to see where charges are reflected for that rush order. Every month, I spend more time making sure I should be charged for each item reported than I do making plans for my department’s daily work. It’s really frustrating to see charges for things I have no control over.” Travers: “The way we get information doesn’t help, either. I don’t get copies of the reports you get, yet a lot of what I do is affected by your department, and by most of the other departments we have. Why do the budget and accounting people assume that I should be told only about my operations even though the president regularly gives us pep talks about how we all need to work together as a team?” Christensen: “I seem to get more reports than I need, and I am never getting asked to comment until top management calls me on the carpet about my department’s shortcomings. Do you ever hear comments when your department shines?” Travers: “I guess they don’t have time to review the good news. One of my problems is that all the reports are in dollars and cents. I work with people, machines, and materials. I need information to help me solve this month’s problems—not another report of the dollars expended last month or the month before.”

a. Based on the conversation between Terry Travers and Bob Christensen, describe the likely motivation and behavior of these two employees resulting from the Aurora Manufacturing Company’s performance reporting system.

b. When properly implemented, both employees and companies should benefit from performance reporting systems.

1. Describe the benefits that can be realized from using a performance reporting system.

2. Based on the situation presented above, recommend ways for Aurora Manufacturing Company to improve its performance system so as to increase employee motivation. (CMA adapted)