Crafton Carbuckle began a corporate consultingfirm, Creative Consumer Consultants, Ltd., in 1994. The firmspecializes in assisting corporate clients analyze markets andpromotional campaigns. Most clients are mid-sized localcorporations who do not have highly developed in-house marketingdepartments.
CCC has proved to be highly successful primarilybecause of the strong personal attention given to the clients bythe project managers. Since inception, CCC has expanded tofour world-wide offices with locations in New York, Chicago, LittleRock AK, and Paris. The home office is in New York.
Except for the Little Rock office, all offices havebeen in business for at least four years and have a wellestablished clientele. The Little Rock office was establishedjust last year and is struggling to attract major clients. The office in Little Rock is an experiment by the company todetermine the feasibility of locating future offices in smallerbusiness communities.
Each office is headed by an office manager who isreasonable for all activities in that office. The managersare paid a reasonable salary plus a bonus with two inputs. The first input is the net income of the manager's office and thesecond is the sharing of a portion of the overall companyprofits. Managers have a high level of independence to makedecisions and are held accountable for the results.
Each office is allocated a portion of thenon-traceable fixed costs of the organization that are common toall offices. It is the policy of the company that thisallocation is based on the estimated total billings of eachindividual office for the year. Currently, this allocation ison the basis of gross office billings.
The current year's segmented operating results areshown below. All numbers are in 000's of $.
| Total |
New York |
Chicago |
Paris |
Little Rock |
| Billings (Revenue) |
50,000 |
22,000 |
10,000 |
16,000 |
2,000 |
| Traceable Consulting Costs |
33,500 |
14,000 |
6,000 |
12,500 |
1,000 |
| Non-Traceable ConsultingCosts |
10,000 |
4,400 |
2,000 |
3,200 |
400 |
| Gross Profit on Sales |
6,500 |
3,600 |
2,000 |
300 |
600 |
| Traceable Other Costs |
1,000 |
300 |
200 |
500 |
0 |
| Non-Traceable Other Costs |
2,500 |
1,100 |
500 |
800 |
100 |
| Net Income |
3,000 |
2,200 |
1,300 |
(1.000) |
500 |
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Revise the table above assumingthat non-traceable costs are not allocated.
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Compare the evaluation of the office managers thatwould be made under the original table and the table you have justcreated.
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Which method provides for more goal congruence? Why? Support your answer with relevant data andarguments -- this should be a two-page paper