Different Management Control Systems that Scepter Pharmaceuticals Inc.

could have
implemented in ATH Technologies and highlight how each would have helped it to
address specific problems it faced in dealing with ATH Technologies.
ATH Micro-Technologies Assignment
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 earnout 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
the 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 are vital to the success
of the unit or organization and that an employee is ordinarily needed to accomplish or
produce. Performance goals provide focus to an employee’s work to ensure that his or her
actions remain target oriented. Performance goals are differ from work activities as they
focus on improving the quality and efficiency of an employee on his particular position in the
company. Some of the basic performance goals for employees such as motivation,
productivity, Efficiency, accountability and job satisfaction. Even if performance goals are
basic to any organisation yet they required to be documented in a lucid and assessable way.
I. Employee motivation- Performance goal of motivating employees is accomplished by
identifying talent through assigning higher level duties and tasks, as well as giving
employees the opportunity to demonstrate their leadership skills

II.

Employee productivity-Performance goal of increase productive of employees 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.
III. Employee accountability – Performance goal of incorporate accountability among
employees i.e. holding employees accountable for their job responsibilities is accomplished
by the use of performance evaluations to determine if employees are actually performing the
job tasks they are hired to do. Observation and guidance are the tools normally used to hold
employees accountable for the work.
IV. 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
V. Employee Efficiency: Performance goal of increasing employee 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 thus a
wholesome improvement of employee and in turn of its contribution to the company. Q5 How
would 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. Business risk may be
categorized in to 3 major types such as: I. Preventable Risks: internal risks, arising from
within the organization, that are controllable and ought to be eliminated or avoided.
Examples are the risks from employees’ and managers’ unauthorized, illegal, unethical,
incorrect, or inappropriate actions and the risks from breakdowns in routine operational
processes these type of risks may produce some short-term profits for the firm, but over time
such actions will diminish the company’s value.it can be controlled by monitoring operational
processes and guiding people’s behaviours and decisions toward desired norms II. Strategy
Risks: voluntarily accepts some risk in order to generate superior returns from its strategy. A
strategy with high expected returns generally requires the company to take on significant
risks, and managing those risks is a key driver in capturing the potential gains. Strategy risks
cannot be controlled through a rules-based control model. Instead, you need a risk-
management system designed to reduce the probability that the assumed risks actually
materialize and to improve the company’s ability to manage or contain the risk events should
they occur. III. External Risks: risks arise from events outside the company and are beyond
its influence or control. Sources of these risks include natural and political disasters and
major macroeconomic shifts. These require another approach to control them as companies
cannot prevent such events from occurring, hence the management must focus on
identification of possible risks on their hindsight and ways to mitigation of their impact. Risk
management is the practice of using processes, methods and tools for managing these
risks. it focuses on identifying what could go wrong, evaluating effects of each type of risks
and how they should be dealt with and implementing strategies to deal with those risks.
Good communication is critical to the risk management function. Effective risk management
is not confined to understanding, modelling or testing risk – but in being able to communicate
risk and its impact on the business, and being able to influence in that regard. Following are
some of the ways though which business and operational risks should be communicated. 
By established a risk review board made up of independent technical experts whose role is
to challenge the various risk-assessment, and risk-mitigation decisions to ensure that
evaluations of risk taken place periodically throughout the organisation.  By developing a
companywide risk perspective by focusing the discussions in strategic planning, such as
from the Balanced Scorecard, an essential management tool for strategy measurement and
communication.  By Risk Event Card that is generated on the basis of the identified risk
events which are related to each objective on the company’s strategy map, and listing the
practical effects of the event on operations, the probability of occurrence, leading indicators,
and potential actions for mitigation. It also identifies who has primary accountability for
managing the risk.  Visualisation of risks using a heat map presents a big picture, holistic
view to share while making decisions about the likelihood and impact of entity-wide risks
within an organisation. A heat map is a two-dimensional representation of data in which
values are represented by colours and can be designed from being simple (qualitative only:
3x3) to very complex (both qualitative and quantitative: 5x5). It is important to carefully
design the heat map so that the terms used to describe “potential impact” and “likelihood”
are what is used in your organisation. 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 or operational performance etc.
There are different tools such as a. Business process engineering b. Total Quality
management c. Customer relationship management d. Supply chain management etc. to
assess these different types of performance. 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 Micro-Technology.
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 an 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 more likely to be biased by the senior management thus resulting in
degrading employee performance.
2. ATH was not innovative enough as it has been revealed 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 huge
fixed expenditures on the product developments 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 company’s problems 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 analysed? Performance measurement is a
tool in the hand of management to control the outcomes of the decisions related to
operations. A performance measurement system should provide timely information is a
necessary tool in the hand of any management. It’s a process that can greatly impact
operations. There are a wide variety of ways in which performance can be measured, The
key challenges with performance measurement is selecting ‘what to measure’. The priority
here is to focus on quantifiable factors that are clearly linked to the drivers of success in your
business and your sector. These are known as key performance indicators (KPIs).Following
are the ways to measure performance. MEASUREMENT OF FINANCIAL PERFORMANCE
Financial measures of your performance is an important part of running a growing business.
Measuring the profitability the key standard measures are: Gross profit margin, Operating
margin, Net profit margin and Return on capital employed (ROCE) This allows you to see
how well the money invested in your business is performing in comparison to other avenues
of investments. Liquidity ratios, efficiency ratios of effective asset utilisation, financial
leverage or gearing ratios, and discounted future net Cash flow. MEASUREMENT OF
CUSTOMER VALUE CREATION Finding and retaining customers is a crucial task for every
business. So when looking for areas of your business to start measuring and analysing, it's
worth asking yourself if you know as much as possible about your clientele. Try to perceive
the business from its customers' point of view. Measure from customers' perspective can
help the company to avoid losing valuable customers in the process of growth. Collection of
Customer feedback about the operations and the products or services through sales data,
complaints, questionnaires and comment cards etc. Software for customer relationship
management (CRM) can be a powerful tool for capturing and analysing information about
your customers and the products and services they purchase. MEASUREMENT OF
EMPLOYEES Measuring through meetings and appraisals, Informal meetings and more
formal appraisals provide a very practical and direct way of monitoring and encouraging the
progress of individual employees. , Regular staff meetings can also be a very useful way of
keeping tabs on wider developments across your business, Quantitative measurement of
employee performance. The most commonly-used measures are sales per employee,
contribution per employee and profit per employee MEASUREMENT AGAINST
COMPETITORS - BENCHMARKING Benchmarking is a way of improving your
understanding of your business performance and potential by making comparisons with
other businesses i.e. compare against businesses in the same sector. But Benchmarking
can be done internally within the business processes. Focus on those areas that drive
business success in your sector company’s key drivers A good performance measurement
framework will focus on the customer and measure the right things. Performance measures
must be: • Eloquent, explicit and commonly understood • Held and managed by the
responsible teams within the organisation • Based on a high level of data reliability •
Facilitate data collection is rooted within the normal procedures • Able to initiate
improvement • Accompanying 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 preferred criterions of performance,  Metrics are developed
to compare the anticipated performance with the actual achieved standards,  To identify
gaps and improvement actions initiated.  To continuously implemented the steps of
performance measurement and get it 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.
Q4 Which additional measures would you use to implement the strategy? A strategic plan
provides a business with the roadmap it needs to pursue a specific strategic direction and
set of performance goals, deliver customer value, and be successful. However, without a
proper implementation plan it doesn’t guarantee that the desired performance is reached.
Implementation is the process that converts strategies and plans into actions in order to
accomplish the required strategic objectives and goals. Implementing the strategic plan is
more important, than the strategy plan itself. A strategic plan addresses the ‘what and why
‘of actions, but its implementation addresses the ‘who, where, when, and how’. Both are
critical to success. Indeed, companies can gain competitive advantage through
implementation of strategic plans effectively.

The first stage of implementing your plan is to make sure to have the right people on board.
Following the planning process, broaden employee skills through training, recruitment, to
include new competencies required by the strategic plan.

To have sufficient funds and enough time to support implementation.

Restructure the management and define appropriate lines of authority, with a clear and open
lines of communication with your employees.

Meetings to review the progress should be scheduled monthly or quarterly, depending on the
level of activity and time frame of the plan of action.

Build milestones into the plan that must be achieved within a specific time schedule. A
performance scorecard is one tool used that incorporates progress tracking and milestones.

Create an environment that connects employees to the organization’s mission and that
makes them feel comfortable.

Finalize the strategic plan after obtaining input from all invested parties. Align company’s
budget to annual goals based on your financial assessment. Produce the various versions of
your plan for each group. Establish the performance scorecard system for tracking and
monitoring your plan. Establish your performance management and reward system.
Communicate and implement the strategic plan to the whole organization Build all
department annual plans around the company’s strategic plans.



Q5 If you were president of ATH tech. what would you do to focus the attention and efforts of
your employees? 1. Keep the communication simple and clear. And stay focused on the
massages that are vital for retaining employee attention. 2. Be clear on what’s distracting the
focus of attention of employees and deviating them from their allocated goals so that the
managers could be strategic about how to shift their team away from it. 3. To make efficient
use of scarce resources especially human resources. 4. Introduce Performance incentives to
create a motivation factor for the employee to reach above and beyond a goal. 5. Try to
acknowledge an employee's idea and recognize them within the company for bringing a
change and make the employee recognized.