Background Note | HBS Case Collection | December 2000 (Revised January 2002)

Incentives and Controllability: A Note and Exercise

by Brian J. Hall

Abstract

Describes three performance measures for "plants" or businesses: cost centers, revenue centers, and profit centers. Discusses what should be done if a function outside of the "controllability" of the manager affects the performance measure and therefore compensation.

Keywords: Factories, Labs, and Plants; Cost; Profit; Revenue; Compensation and Benefits; Managerial Roles; Performance Evaluation; Motivation and Incentives;

Citation:

Hall, Brian J. "Incentives and Controllability: A Note and Exercise." Harvard Business School Background Note 801-334, December 2000. (Revised January 2002.)