Part A

Q1 Does the earn-out structure focus on the right performance goals?

The current earn-out structure is mainly focused on short-term revenue and profit maximization rather
than aiming for a sustainable overall business growth. Apart from the financial aspects, the
performance goals should be focused on the other factors such as Customer satisfaction, Internal
control and management and employee innovativeness. A wholesome performance measurement
should be as parallel with the organizational objectives. Thus the proposed earn-out structure is not
effective enough to drive the organization and its work force towards the long term goals of the
organization.

Q2 Should Scepter Pharmaceutical put additional controls on his entrepreneurial firm?

Scepter the acquirer company needs to focus on the achievement of the proposed synergies that were
supposed to be derived from the conglomerate. ATH has every prerequisites to be a successful target
company provided Scepter Pharmaceuticals should impose effective control for operational efficiency
with focusing on the optimum utilization of te available resources of ATH at its disposal. Further it is
necessary for Scepter to impose additional control on ATH in order to achieve the

Q3 if you were president of ATH tech how would you communicate and motivate employees to
achieve profit and performance goals?

Motivating other people is always a difficult task yet without right motivation the workforce of ATH
could not be able to achieve the targets that has been set before them and it is duty of management to
communicate effective motivation to its employees. This can be done through implementing a
effective goal alignment throughout your organization in support of a well-defined strategy.

There are many reasons to implement goal alignment as it will

 Improve and accelerate the operational execution i.e. moving from strategy planning to
strategy execution at ease.
 Increase in employee morale and improves retention, resulting in more engaged employees to
words a mutual organisational goal.
It is necessary to Effectively communicate expectations to the employees while identifying their
strengths and weaknesses on the go to ensure that they understand what the organization is trying to
achieve, and well aware about his/her roll in it contributed to the organization's core mission and
communication can be done through a well-defined scorecard system both on organisation wise and
individual department wise. Further it is also important to communicate about the rewards based on
performance and achievement of the targets to promote productivity, Thus by putting together the
goals and rewards are need to be simultaneously communicated to motivate employees.

Q4 what are the appropriate performance goals for employees to focus on?
There are essentially four types of goals that the company as the employer can set with employees.
1. Job Goals: goals that visibly define tasks that will be mandatory to complete the job. These goals
should be very personalized to the individual position and employee.
2. Project Goals: activities that the employee should pursue with a clearly defined beginning and
end.
3. Professional Development Goals: These goals focus on the improvement of both technical and
efficiency essential for their professional growth. These goals should be helpful to develop not only
the employee, but help your organization as a whole.
4. Performance Goals: Performance goal are specific end result that contributes to the success of
the unit or organization and that an employee is expected to accomplish or produce. Performance
goals provide focus to an employee’s work to ensure that his or her actions are directed towards
achieving important mission-related outcomes. Performance objectives are not work activities, task
descriptions, or responsibilities listed in a performance description. Basic performance goals for
employees such as motivation, productivity, Efficiency, accountability and job satisfaction these goals
are basic to any organisation yet it is good to document them in a lucid and assessable way.
Employee motivation is best served by recognizing talent through assigning higher level duties and
tasks, as well as giving employees the opportunity to demonstrate their leadership skills
Employee productivity assessing employee productivity is a critical performance goal. Performance
management systems consist of appraisals and evaluations used to determine productivity levels and
ways to improve productivity. Barriers or obstacles that prevent high productivity are usually
discovered through evaluating employee performance; they can then be corrected with training and
development, which are part of the goal-setting stage within most performance appraisals. Identifying
the causes of interrupted productivity is just the beginning,
employee accountability Holding employees accountable for their job responsibilities is yet another
performance goal. Managers use performance evaluations to determine if employees are actually
performing the job tasks they are hired to do. Managers also use tools such as observation and
guidance to hold employees accountable for the work
Employee job satisfaction performance evaluations that assess the level of job satisfaction can
actually determine employee success in other work areas. Employees who are satisfied with their job
assignments and the support they receive from supervisors and managers often are more productive
and engaged. In addition, employee job satisfaction improves with employee recognition
Employee Efficiency Efficiency is a similar concept to productivity, but it approaches output in a
different way. Efficiency can be defined as the speed, accuracy and consistent quality with which an
employee works.
Companies that want to encourage employee growth can incorporate relevant career-oriented key
performance objectives pertaining to the employees' educational development. For example:
Continuing education -- The employee will participate in a certain number of continuing education
courses during a 12-month period, for example. The courses should relate to the employee's current or
aspiring position. Certification -- An employee whose performance depends on a technical
certification can have a goal to obtain that certification within a given period of time.

Q5 How yould you communicate and control events and employee action that could put business
objectives at risk?

Every business faces risks that could present threats to its success.

Risk is defined as the probability of an event and its consequences. Risk management is the practice
of using processes, methods and tools for managing these risks.
Risk management focuses on identifying what could go wrong, evaluating which risks should be dealt
with and implementing strategies to deal with those risks. Businesses that have identified the risks
will be better prepared and have a more cost-effective way of dealing with them.

Q6 what are the best financial measures to asses ATH Micro Technologies performance? Why?
A company’s performance can be defined in different aspects such as financial performance,
workforce performance, operational performance etc. There are different tools to assess different type
of performance ,specially talking about financial performance and overall operational efficiency
performance can be assessed by use of various type of ratios .All time primary measure of a
company’s performance is Return on Equity (ROE).Another measure is Return on Assets (ROA)
which is helpful in analysing the long-term profitability .ROA as a key performance measurement
metrics focuses on assets required to run the business including their contribution towards the bottom-
line .Other type of ratios can be used to assess financial performance of the company such as
Liquidity ratios to measure short-term liquidity position of the company , Solvency Ratios especially
the Debt-Equity ratio which is important for determination of whether the company is leveraged .ATH
from the very beginning of its operations has been driven by revenue and profit maximisation
objective through large market capture thus it is essential to assess its future feasibility along with
historical performances till now .That’s why alongside we can use the EVA margin analysis to assess
the future viability of the company .Enterprise value addition or Economic value addition (EVA) is
the measurement of companies future projected cash flows with discounting to present time in terms
of Economic profits it likely to earn in the future. EVA can be defined as how much economic profit
a company produces per dollar value of sales. In simple terms it is the value created for stakeholders
and lower the sales the profit will be lower or vice versa yet it EVA margin can be positive i.e. though
the company is in no profit zone yet it will be able to create value for shareholders in the long run.

Part B
Q1 How would you evaluate the performance of ATH microtec. During the growth period?
The objective of ATH during the growth period was to acquire as much market share as it can by its
aggressive strategy of product development and frontline marketing.Although ATH’s senior managers
were planning for such a strategic move , they were not yet ready to make the move happen in a
effective way.the key evaluations of ATH’s performance are as follows:
1. The senior managers are too much possessed with acquiring market share through aggressive
push of its products that they ignored the other factors such as the employee bonus scheme
which was not linked systematically to individual performances rather the bonus system was
mre likely to be biased by the senior management thus resulting in degrading employee
performance.
2. ATH was not innovative enough as it has been reveled subsequently that a new competitive
technology in Europe can dilute its market shares. Instead the development cost that were
incurred on the product development were became overhead thus slicing a huge chunk of the
profit for the 2001 and 02.
 3. As from the very beginning ATH’s objective was to increase revenue and the bottom line , it
completely ignored the cost of productions which needed to be optimized to earn a fair
amount of contribution margin which in turn would have been helpful in meeting its huse
fixed expenditures on the product developmnts and other establishment expenses.Although
Revenue has increased considerably ,neither the company was able to turn the huge revenue
in to a healthy bottom line nor a breakeven contribution margin.
Q2 What is the strategy of the business?
The strategy of ATH at its growth phrase is to gain market share and thus it mainly focused on its
revenue maximization strategy. Owing to which it spent huge amounts of money on marketing and
selling expenses as well as on product development in a short span of time.The senior managers at
ATh had a perception that gaining a large market hare ad becoming a major player in the market in
terms of volume will going to solve the companies probems of low bottom line. Their whole plan was
revolving around how to achieve a bigger sales figure in short term.
Q3 How should performance be measured and analyzed?

Performance measurement is a tool to help managers control the outcomes of their organizations.
It enables them to be the driver rather than a passenger on their organizational journey.

These criteria define the capabilities that effective management control systems must possess and
establish rules for implementation. A performance measurement system that provides timely
information for management decisions is their unifying component

In the cycle of never-ending improvement, performance measurement plays an important role in:

• Identifying and tracking progress against organisational goals

• Identifying opportunities for improvement

• Comparing performance against both internal and external standards

To ensure customer requirements have been met

• To be able to set sensible objectives and comply with them

• To provide standards for establishing comparisons

• To provide visibility and a “scoreboard” for people to monitor their own performance level

• To highlight quality problems and determine areas for priority attention

• To provide feedback for driving the improvement effort

A simple performance measurement framework

A good performance measurement framework will focus on the customer and measure the right
things.

Performance measures must be:

• Meaningful, unambiguous and widely understood

• Owned and managed by the teams within the organisation

• Based on a high level of data integrity

• Able to drive improvement

• Linked to critical goals and key drivers of the organisation

There are four key steps in a performance measurement framework - the strategic objectives of the

organisation are converted into desired standards of performance, metrics are developed to
compare the

desired performance with the actual achieved standards, gaps are identified, and improvement
actions

initiated. These steps are continuously implemented and reviewed:

Performance measurement is a fundamental building block of TQM and a total quality organisation.
Historically, organisations have always measured performance in some way through the financial
performance, be this success by profit or failure through liquidation. However, traditional
performance measures, based on cost accounting information, provide little to support
organisations on their quality journey, because they do not map process performance and
improvements seen by the customer. In a successful total quality organisation, performance will be
measured by the improvements seen by the customer as well as by the results delivered to other
stakeholders, such as the shareholders. This section covers why measuring performance is
important. This is followed by a description of cost of quality measurement, which has been used for
many years to drive improvement activities and raise awareness of the effect of quality problems in
an organisation..

Different tools are used to measure organizational performance such as TQM, Balance score
card,Cost of quality evaluation etc.

Q4 Which additional measures would you use to implement the strategy?