2Class Announcements Service Learning Assignment: Progress Report should be completed one week after initial meeting with the client – those submitted will be returned next classFinal presentations should include Danika LeBlanc or IService Learning Final Report (group) due March 31st (flexible)Final Exam 7:00pm April 11, 2014 in SCHWAssignment #5 due April 3rd; available on-line
3Class Objectives Considering the components of performance measurement Understanding performance measurement effectivenessLinking performance measurement to compensation
4Charley’s Family Steak House Company Context:Charley Turner’s four steak restaurantsLocated in a rapidly growing mid-size city in TexasRestaurant goal – best steak house in the cityCharacterized by:Pleasant atmosphereFast and courteous serviceHigh quality foodFreshly prepared goodReasonable pricesInnovative express lunch option
5Charley’s Family Steak House Company Context: Unit 2Alex Pearson is the manager of Charley’s Steakhouse Unit 2 (since one year)Seating for 150 customersEmploys peopleMenu featured 4-6 items in each of four categories ranging in price from $1.99 (Small salad) to $ (Lobster dinner)Feature an express service for frequent lunch time customers
6Charley’s Family Steak House Company Context: Customer SegmentsCommunityLocated next to a shopping mallBusiness communityOffices are nearbyNo eating establishment within one mile radiusHotel100 room budget motel with no restaurant within walking distance
7Charley’s Family Steak House Company Context: EvaluationPlans to implement a new bonus plan25% of salary in bonusesSpecific performance measures not yet determinedSuggestions from managers not solicitedComparison between budget and actualOriginal budget prepared was aggressive and optimisticProfit is $46,490 less than plannedSeverity of the recent recession
8Charley’s Family Steak House Issues:How did actual sales compare with planned sales?Profit is $46,490 less than plannedActual sales vs planned sales – variance analysisSales mix analysisCustomer use of couponsHow well were costs and expenses controlled?Actual expenses vs planned expenses – variance analysisPerformance EvaluationComparison of planned vs actualNew bonus plan
19Charley’s Family Steak House Conclusions: Budget vs ActualActual operating profit for Unit 2 is $47,490 less than anticipatedActual profit for Unit 2 is $62,180 less than the flexible budgetCustomer mix change from 40/60 to 50/50 which changed weighted contribution margin from $1.84 to $1.63 per customerCustomers made use of coupons in greater number than anticipated perhaps because of the recession ($105,213 more than anticipated).
20Charley’s Family Steak House Conclusions: Evaluation SystemParticipatory – no consultationInventive and risk – none communicatedGoal congruence – not linked to overall except generally (e.g. best steak house in town)Fair and objective – unknown measuresAttainable – Optimistic and aggressive, high expectations.
21Charley’s Family Steak House Conclusions: Evaluation System - ControllabilityPrices - are set (over 10%) by CharleyOrdering - of food done centrallyCoupons (discount) - good at all four locationsRecent economic recession -was not forcastableAdvertising - is managed by CharleyManagement charge - is assessed by Charley
22Class Objectives - Revisited Considering the components of performance measurementUnderstanding performance measurement effectivenessLinking performance measurement to compensation