Mountain Lumber Company

19 Pages Posted: 21 Oct 2008

See all articles by Luann J. Lynch

Luann J. Lynch

University of Virginia - Darden School of Business

Abstract

In 1998, Mountain Lumber Company implemented a performance measurement and incentive plan for all company employees. Details of the plan by department for both managers and non-manager employees are presented, and students are asked to review and evaluate the plan in light of the company's strategy. The case exposes students to evaluating key success factors and developing performance measures for successfully implementing organizational strategy, linking performance measures to monetary incentives, identifying possible unintended consequences of performance-measurement systems, and developing compensating control mechanisms to discourage those behaviors.

Excerpt

UVA-C-2147

Rev. June 17, 2009

MOUNTAIN LUMBER COMPANY

“A new incentive plan,” thought Willie Drake, the owner and president of Mountain Lumber Company. “Yes, I'm sure of it. That's what we need, a renewed sense of motivation for all of our employees.”

At his next meeting with John Peterson, the company's controller, Drake told him of his idea.

John, I've been thinking. We've talked a lot about growth around here lately. And I see it happening. You can look at our revenues and see that we're growing right on target. But look at our margins. Last year, they're down a bit from the year before. We've got to keep growing like this, but we've got to keep our margins up while doing it. We've got to keep volume and yield up as well. I'd like us to think about a new incentive plan for our employees. I want to make sure we maintain this rate of growth; that is our main objective. And, I want to make sure we increase margins. I think we should use an incentive plan to make sure everyone knows how he or she can contribute to achieving these goals, and I want everyone to be rewarded when we do it.

. . .

Keywords: accounting methods, compensation, employee control systems, incentive performance management

Suggested Citation

Lynch, Luann J., Mountain Lumber Company. Darden Case No. UVA-C-2147, Available at SSRN: https://ssrn.com/abstract=1276594

Luann J. Lynch (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4721 (Phone)
434-243-7677 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/lynch.htm

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