Berkshire Controls Analysis for Management Accounting

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Berkshire Industries PLC
Berkshire’s Strategy
Founded in 1852, Berkshire Industries PLC grew from a brewery serving local pubs to a medium-sized publicly held corporation focused on the beverages and snack foods industry. The brewery used a decentralized strategy in terms of the structure of its operations, focusing on four divisions; beer, spirits, soft drinks and snack foods. Up until 2000, the company’s annual planning process related to the incentive systems was a bottom-up process where each operating divisions proposing their earning targets and how they will achieve them. Each division was united under a common goal: maximize shareholders’ value.
Berkshire’s Objectives of its Incentive Plan
Ever since Berkshire went public, it instituted an incentive plan for division and lowel-level managers. The system was built to achieve three objectives; to ensure the congruence between management and shareholders’ interest, to provide additional motivation for managers to work harder and to provide a simple and objective performance evaluation.
In comparison, division and lowel-level managers’ objectives are maximizing their annual revenue and having the necessary power and understanding to influence their yearly compensation. It is senior management’s responsibility to make sure there are sufficient incentives for the managers to behave in the company best interest and maximize shareholder value. Unfortunately, this was not the case under both the old and new incentive plan.
The Desired Characteristics of an Incentive Plan
An incentive must fulfill several important criteria to be considered effective; it should be valued, understandable, timely, durable, reversible, cost-efficient and congruent. However, on the case of Berkshire, the employees and management explicitly prioritized some of the criteria.
Berkshire is a 150 year-old company. With its established brand, it is reasonable to assume that management must have a definite long-term plan for the

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