The company 2TW manufactures and sells products overall Europe and is organised into dozens of strategic business units (SBUs). SBU managers, who report to regional directors, have for more years been paid bonuses on total SBU sales generated. This has led to a fast growth in overall turnover but 2TW has experienced declining profitability over the past few years, and the Chief Executive fears a loss of control over SBU operations. As a result, six months ago 2TW's Chief Executive used management consultants to conduct a whole organisational review. The management consultants have now reported that:

• inadequate quality control systems exist within the company, which has led to differing operating efficiencies between SBUs;
• there are significant numbers of returned goods which needs replacement or reworking;
• current incentives for SBU managers are inappropriate given 2TW's declining profitability.

Suitable measures of performance for SBU managers will be designed as part of the redesigned remuneration and rewards package. Describe the desirable features of such measures.

Specific

So far, the Chief Executive has announced the initiative in an open letter to all SBU managers. Further dialogue among 2TW's HR department (which is responsible for the total redesign of the remuneration and reward package containing the bonus scheme)

Measurable

Rewards for SBU managers will require to encourage profitability and quality. Precise quantifiable measures are readily available in respect of net profit. Appropriate metrics and evaluation criteria require to be agreed upon and put in place presumably aligned to ISO 9000 standards and levels, cost of returns and reworking.

Achievable

2TW's HR department must identify that individual managers need to have control over reaching performance targets.

Realistic

2TW's HR department requires to translate scheme aims into realistic targets which are recorded accurately and reliably.