Case:
David Green is considering his operating report for the most recent year. David is a restaurant manager for one of twenty restaurants owned and operated by Hoof and Fin, Inc. The first Hoof and Fin Restaurant was opened in Austin, Texas, almost forty years ago, but has since grown to a twenty-location chain throughout the major cities in Texas. The owner, Roger Nisbett, owns most of the stock in the company, which went public sixteen years ago to finance the growth of the company. David has been working for Hoof and Fin for six years, first as an assistant manager, and currently as the manager for the restaurant located in Waco, Texas. This year is his first year as a manager.
The principal attraction of the restaurant, and the basis for its success, is that diners can select from either a steak menu or a seafood menu, and in each case the prices are very low relative to most restaurants in the area.
English: Flag of Waco, Texas
English: Aerial view of Downtown Waco, Texas, look...
Hoof-Fungus_Tinder-Bracket_103262-480x360The menu and restaurant décor are designed to appeal to budget-conscious diners, such as college students. Each of the twenty restaurants is successful, though some more than others.
Each manager is evaluated on his or her performance relative to a budget set at the beginning of the year. The budget is set by Marv Gregson, chief financial officer for the company, who looks at trends for each of the locations and sets a budget for each based on past sales and desired future sales and earnings goals for the company. Each manager participates in the budget-setting process to a degree, though each manager is quite aware that Marv will have the last say in the determination of the final budget. Each manager is told that a significant bonus is in order for managers whose profit...