In 2006, Jiang Wei, CFO of China Resources Corporation, was seeking to implement a variety of new management control systems in a complex diversified corporation during a period of rapid economic expansion in mainland China. Instilling efficiency, productivity, management, and control into what had been a traditional state-owned enterprise posed challenges on many fronts. The case enables a discussion of the various ways in which balanced scorecards and strategy maps can be integrated with traditional management control systems to govern strategy implementation in a diversified corporation. Additionally, it allows students to appreciate the benefits and challenges of using highly formal performance management systems in the face of strategic uncertainty.
1. What is Jiang Wei trying to accomplish with the incentive systems, i.e., performance contracts and EVA-based incentive plans? Does CRC need both incentive systems? Why or why not? Hint: Identify what each system is accomplishing.
2. Would managers behave differently if the performance contract were eliminated? Why not use the EVA-based plan to provide incentives and balanced scorecards to provide information?
3. In the last two paragraphs on page 10 of the case, CRC Chief Financial Officer Jiang Wei identifies his concerns going forward. Do you share his concerns? If so, what recommendations do you have to ensure that CRC does not become too inward focused?