Mgad40

WCN #5 - Formosa Plastic Group

By: Ruvindu Gunasekera

997423658

For: MGAD40H3 S Lec 02

March 3rd, 2016

The Formosa Plastics Group (FPG) is a diversified chemical company, also the largest private company in Taiwan. The case describes the unique control system used by this large corporation. The uniqueness of the system was that all employees were measured subjectively rather than solely on objective performance measures.

Issue 1 – Planning Process and Performance Evaluation

As stated in the case the company’s planning process involves a 4 month planning process; from September to December. This is a “bottom-up” planning process as the division managers submit their sales and production plan to the top management, who revise and give their opinions. The management uses the targeting pricing/ costing approach. A major component to the process is emphasizing on the importance of continuous improvement. FPG’s performance evaluation process is very subjective based on objective numbers. A major tool that is used is the budget, and also a key is that they use controllable factors in evaluating managers. The bonuses and incentive pay isbased on these measures and it also take into consideration the person’s ability and potential for the future, seniority, teamwork, cooperation, and the situation the person faced. The subjectivity in performance evaluations is working at FPG as the employees are comfortable and the organization as a whole is successful.

Issue 2 – Polyolefin Division

Mr. Hsaio, the manager of the Polyolefin division, is not being held accountable for the performance of his division. This is due to the fact that he does not control the costs of the products purchased as the government controls the price. However he is responsible for the other performance measures of the division. Thus this division’s performance is measured in even more subjective manner but it is still recognized as a...