In 2009, the total annual bonuses for the year earned by the managers of SID and Ultrasound were approximately £85,000 and £74,000, respectively.
Exhibit 1 Harwood Medical Instruments PLC
Operating results for the surgical Instruments and Ultrasound Diagnostic Equipment Divisions, 2010 (£ in 000s)
|Surgical Instruments Division||Ultrasound Diagnostic Equipment Division|
|1st half of 2010||2nd half of 2010||1st half of 2010||2nd half of 2010|
|Patent applications filed||0||1||4||8|
|Scrap and rework costs||£51.1||£45.0||£39.7||£28.2|
|Customer satisfaction (average)||78%||89%||81%||91%|
1. Critically analyze the current reward system that Harwood Medical Instruments PLC uses to award the bonus.
2. Calculate the bonus earned by each manager of the two Divisions for each 6-month period and for the year 2010 (i.e. total bonus) [Note: the figures are in thousands; (£’000s)].
3. (i) Design a performance measurement reward system that would encapsulate a rather “more balanced” approach in awarding of bonuses.
(ii) Briefly explain how the reward system you design in 3(i) can be used to award bonus.
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