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TECO Electric & Machinery Co.Ltd.

case study
by

Valeriya Alexandrova

on 18 January 2013

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Transcript of TECO Electric & Machinery Co.Ltd.

* Value-added was the most important measure of performance within the company;
* Used to evaluate management performance and for distributing bonuses;
* Employee share has grown from the initial 25% allocation to 43% over the years;
* Employee share allocation didn’t change frequently;
* Value-added is used in all TECO locations. The understanding of the value-added concept by lower-level employees.

If the employee thinks that the goal given him is not reasonable, the incentive to achieve this goal would be very low. Issue #3 Optimal sharing of the corporate value-added Issue #2 Issue #1 No adjustments for uncontrollable changes (typhoon damage, competitor's actions, sources and prices of suppliers etc). TECO Electric & Machinery Co.Ltd. Result control
Value-added evaluation of performance Value- added mechanism Issues Value-added concept - the residual income is distributed to the shareholders and the employees TECO’s Value-added calculation:
= Sales Revenues – Amounts provided to outsiders, which included:
Direct materials
Utility expenses
Depreciation
Indirect expenses (excluding payroll)
Subcontract fees, and,
Other misc. purchases from outsiders. The depreciation and interest expense- include or exclude them in the calculations? Should the employee allocation be adjusted more frequently based on changing market conditions? Cultural adjustments One of the examples of TECO system adjustment for Taiwanese culture is the performance percentage of 100% for the lowest rated employees (not zero).
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