Management Control System

Case Tsinghua Tongfang Co. Ltd

Questions.
1. Evaluate the Tsinghua tongfang Control, performance evaluation and incentive system.
What changes would you suggest, if any?
2. Should Company implement the proposed employee stock option plan?
Answers.
1. Tsinghua Tongfang (THTF) mainly use result control method to create its control system.
THTF had a relatively well developed and objective performance measurement,
evaluatio, and incentive system. It has good control system and made a different with
other company in china significant bonuses also were offered to most otf the company
management level employees based on performance measured in terms of ROI. This
system can increase motivation and drive the best performance of management level
employee to work.
Evaluation of THTF performance evaluation system
a. Evaluation system based on a series of judgement rather than quatified criteria, which
result in a less objective assessment system. The lack of explicitness will impose risk
on employees due to bias or favoritism.
b. Company value equally to the five different aspects. But the truth is, THTF values
performance more than any other aspects. This will result in confusion when
communicating to employees. THTF can emphasize less on obedience and discipline
and weight more about performance and knowledge part, which can help employees
understand what is expected of them.
c. The results of performance evaluation is not linked with THTFs incentive system.
THTF should have an explicit policy or criteria in determining the relationship
between performance and reward.
Evaluation of THTFs incentive system
The discretionary bonus is almost guaranteed, and this will make employees become
less risk tolerant. Usually, the discretionary bonus is a form of variable pay, and it is the
decision of employer on the amount, requirements and timing of the bonus. Employers
shouldnt disclose the bonus in ahead. But in THTF, it has already become an expectation
of employees, or even a guaranteed part of salary. It has lost the incentive purpose. And
the last THTF lack of policy in allocating the bonus pool.
Suggestions;

Company should implement this incentive system also to the lower-level-employee to

encourage them to work best to. And the last suggestion is company should implement
stock option plan when it is legalized by the Chinese Goverment
2. Yes, because if they were able to grant options, THTF managers expected that they would

reduce the size of the bonus potentials to keep the total compensative, but not excessive.
Buth they also wanted key THTF employees to share in the companys success. They
thought that an option program, particularly, whould be important in attracting ang
retaining talented employees to THTF and in rewarding them for their effort.