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 employees 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 companys
value.it can be controlled by monitoring operational processes and guiding peoples 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 companys 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 companys 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 companys 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
companys 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 .Thats 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 ATHs 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 ATHs 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 ATHs 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 companys 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. Its 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 companys
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 doesnt
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 organizations mission and that makes them feel
comfortable.

Finalize the strategic plan after obtaining input from all invested parties. Align companys 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 companys 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 whats 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.