guiding questions belagio
Questions Kooistra Autogroep
2. Evaluate the budgeting, performance measurement, and incentive systems used at Kooistra
Autogroep. What changes would you recommend, if any?
Budgeting system:
The CEO introduced a formal annual budgeting process. The main target of this budgeting system was to determine the net profit targets for the year. The net profit target is the company’s revenue minus the controllable expenses. These targets were for the company’s departments and should help with decentralization of the company. The budgeting process was ment to be bottom-up. This means that the managers of the departments could prepare the budgets and the CEO and CFO then reviewed these budgets. Most managers are unexperienced with budgeting and the review of the CFO and CEO would lead to a discussion so that the managers would get more and more confident with budgeting. This would help the decentralization. The car industry is an industry, which is really dependable on the economic conditions. So the budget made at the beginning of the year is not always a feasible budget. Reviewing the budget a few times a year could change this. The CEO helps out sometimes when the budget target probably is not going to be made. But the managers cannot depend on this.
Performance measurement:
The new performance measurement now includes not only financial information but also nonfinancial information. The performance measurement system is used to communicate the company’s objectives to the personnel. The objects that are measured in the performance are the most important objectives. The performance measurements provide the managers with the information to do their job properly and it provides feedback to the top management about the performance of the managers.
The company uses ‘Balanced Scorecard’ on a weekly basis. The balanced scorecard provides key metrics for the manager’s list of targets and it provides an indication of the progress towards budget target. Besides the
2. Evaluate the budgeting, performance measurement, and incentive systems used at Kooistra
Autogroep. What changes would you recommend, if any?
Budgeting system:
The CEO introduced a formal annual budgeting process. The main target of this budgeting system was to determine the net profit targets for the year. The net profit target is the company’s revenue minus the controllable expenses. These targets were for the company’s departments and should help with decentralization of the company. The budgeting process was ment to be bottom-up. This means that the managers of the departments could prepare the budgets and the CEO and CFO then reviewed these budgets. Most managers are unexperienced with budgeting and the review of the CFO and CEO would lead to a discussion so that the managers would get more and more confident with budgeting. This would help the decentralization. The car industry is an industry, which is really dependable on the economic conditions. So the budget made at the beginning of the year is not always a feasible budget. Reviewing the budget a few times a year could change this. The CEO helps out sometimes when the budget target probably is not going to be made. But the managers cannot depend on this.
Performance measurement:
The new performance measurement now includes not only financial information but also nonfinancial information. The performance measurement system is used to communicate the company’s objectives to the personnel. The objects that are measured in the performance are the most important objectives. The performance measurements provide the managers with the information to do their job properly and it provides feedback to the top management about the performance of the managers.
The company uses ‘Balanced Scorecard’ on a weekly basis. The balanced scorecard provides key metrics for the manager’s list of targets and it provides an indication of the progress towards budget target. Besides the