HCC industries Harvard Case Solution & Analysis

ANSWER TO QUESTION NO 1

The top management of the company is exercising the target budgets from the very beginning which was provided by a firm. The firm linked the targets with the bonuses so that the employees may feel satisfied. The top management of the company was even with the target budgets were not achieving the targets to the full. The targets were being achieved to some extent and the company was not making the effective use of the resources.

The bonuses were linked with the target budgets so that the employees’ feels motivated to work and to achieve the targets in order to receive bonuses. The top management of the company was in a mixed situation, as the company was not achieving its targets to the full, and only some or to a more than 60% of the targets was being achieved(Industries, n.d).

The bonuses were so linked in such a way that the mangers had found a way to achieve bonuses for them under the target levels. The managers were under performing even though they were achieving the bonuses. The managers’ bonuses were provided from the 60% of the achievement of the targets so they were less concerned with the remaining achievements of the targets.

So the relationship to some extent was direct, more the targets achieved the bonuses received will be increased. The flaw was that the levels of achievement were a bit low and the managers were not motivated to achieve the targets as they were receiving bonuses at 60% level of targets.

The relation between the performance and the plans were not sinking in because most of the employees were unaware of the potentials of the bonuses that were related with the targets achieved. The lack of knowledge was a declining factor for the relation of the performance and the target plans(Joshua, 2013).

QUESTION NO 2

Why did HCC corporate managers decide to abandon “stretch” budgeting concept?

ANSWER TO QUESTION NO 2

The concept of stretch budgeting was to increase the budgets and targets, as the targets get achieved, the top management of the company increases the targets for the next year and the employees will have to go for the new targets for the next year.

The top management of the company was not achieving its targets from the very beginning. The top management of the company has different target components and if the managers achieve some of those targets or 60% of the total targets they will be in bonus area and no more motivation will be there to achieve more as the targets will be increased the next time if the managers will achieve the profits.

The managers see no motivation to achieve the targets, as the company will still be providing them bonuses for the 60% achievement of the targets. So the managers became of the habit to not to achieve the targets as they are still having bonus for them.

So because of the targets were not being achieved and the system became stale so the top management of the company has to abandon the stretch budgeting system to improve the results and enhance the targets and bonus levels.

The top management of the company was losing the targets and the employees were getting normal at loosing targets so they were immensely worried about the situation because the revenues of the company were declining. The only division that was working to its full potentials was the one managed by the co founder of the company, so he recommended abandoning the current plans and starting again with some new plans.Hcc Industries Case Solution

QUESTION NO 3

Describe the new processes that HCC implemented to replace its existing budgeting concept. What are the strengths and weaknesses of this new process?

ANSWER TO QUESTION 3

The employees were dissatisfied with the current systems of target budget, and with the bonuses based on those budgets. The employer and the top management of the company felt the need for the change. The top management of the company also experienced that the targets were never achieved under this budgeting system and the bonus system was not good enough to motivate the employees.

The top management of the company shifted itself to minimum performance standards and the company will be providing bonuses on the levels achieved by the managers based on the minimum performance standards set by the company budgets.

The top management of the company based the targets on seven different levels. The top management of the company set targets based on the following and without achievement of the following the bonuses shall not be provided..............................

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