Compagnie Du Froid, S.A.

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Thus, distributing a fixed portion of profits to regions was not aligned with business's treatment towards regional managers being assessed on a same level of meeting out set profit targets and thus paying only 2% as profit. Neither the performance evaluation seemed to be correct nor the incremental rewarding criteria to boost the morale of the managers to achieve higher growth rates in sales.

Strategic Goal System- revenue growth

The revenue growth model is quite promising as it tends to benefit the regional managers for all the hard work that they align towards their regional efforts by change in price mix, sales mix, innovative technologies, etc for profitability through their tactics of competitive rivalry in the region, and focus on advertisement to increase sales. The revenue growth model indicates a fixed portion of corporate profits being allocated to regional managers along with a varying portion of regional sales. In this way even if the company's overall profit went down due to poor performance of a particular region, a manger's share in profits would be affected only by the percentage allocated to corporate profit. He can still enjoy the percentage of his division's profit.

To have regional efforts be pushed for achieving and setting an exemplary performance standards for other regions this system clearly breaks down the evaluation based on regional contributions. Also, it can introduce the amount of bonuses to be directed for different regions by way of statutory profits retained with the company in a pool. This can be of great help in situation of regions struggling for sales and over running their budgeted costs. So, this system suggests a regional, corporate and bonus shares to be allocated in best possible manner and form a sound foundation for rewarding regional efforts.

A Holistic System - This holistic system is inclusive of the performance evaluation for regions based on operational efficiency, innovation, sales growth, expansion in region, competitive tactics and the segregation of regional & corporate share of profits as well. Being inclusive of economic conditions such as labor market, intellectual rights, transfer pricing, weather uncertainties, and regional performances to evaluate a regions performance it can prove to be a comprehensive approach to measure the standing of a region.

Holistic system provides a fair weighted compensation, flexible budgeting, variance analysis, return on investment, performance measurement for all the stakeholders and is open to other methods of transfer pricing. Corporation needs to set out a comparable breakdown through an analysis in order to have a detailed forecast for a change in temperature, sales quantity variance, sales mix variance, and product price variance in relation to its impact on sales to be generated as benchmark (assuming everything else remains same).

- Recommendation

Compagine du Froid has been performing well for its regional efforts towards maintaining its profit goals, but due to future uncertainties in France, Italy and Spain it needs to device a performance evaluation system to have a fair compensation to regional managers. It is quite beneficial to go with the holistic approach as it breaks down clearly what if criteria for various factors of importance to corporation's regional efforts. To sustain and enhance its regional growth Compagine du Froid should be stratigising its profitability motive to its existing facilities, operations, regional tactics, personnel training, and fine selection of future technologies to be implemented to increase production capacity.

Also, to motivate regional managers to perform better, their compensation bonus should be directly linked to their own division's profit. Jacques should decide a ratio of percentage of corporate and regional profits depending on his company's budget for bonus. For example, he should give 1% of corporate profits plus 2% of regional profits and yearly bonus of 1%.

Another factor to determine the compensation would be the company's strategic goals and manager's performance in achieving these goals. In order to motivate employees to exceed the expected revenues in profit plan, Jacques should give a higher percentage of the value by which the manager surpasses the expected profit. This would keep the manager motivated in undertaking the challenging opportunities to contribute to the company's growth.

Thus, this comprehensive approach takes care of future conditions being unfavorable for regions and a specific design for course of action to be taken through a clear break down of variance analysis from factors important to regional performance.