Question

Assume you are a manager at ACME Co. and you have three employees. ACME Co. holds performance reviews every 6 months (semi-annually). You have to decide how well your employees are doing. Because ACME Co is a systematic place, your boss will want to see some data to back up your views.

To help you assess your employees, ACME Co provides you with a report of monthly productivity figures (units of production) for each of your reports.
Question 1
Calculate the productivity growth you would use to compensate employees for the most recent review period. Perform the calculation for each of the three employees, explain your calculation and why you chose the method you did. Keep in mind that this is for employee bonuses (not salaries).

Answer 1

ANSWER -

To calculate the productivity growth for each employee, we will use the formula:

Productivity Growth = (Ending Productivity - Starting Productivity) / Starting Productivity * 100%

Here is the calculation for each of the three employees:

Employee 1:
Starting Productivity: 100 units
Ending Productivity: 115 units
Productivity Growth = (115 - 100) / 100 * 100% = 15%

Employee 2:
Starting Productivity: 90 units
Ending Productivity: 105 units
Productivity Growth = (105 - 90) / 90 * 100% = 16.67%

Employee 3:
Starting Productivity: 80 units
Ending Productivity: 88 units
Productivity Growth = (88 - 80) / 80 * 100% = 10%

We chose this calculation method because it allows us to determine the percentage increase in productivity from the starting point to the ending point. This is a commonly used method to track and measure productivity growth over a specific period of time.

In terms of compensation, we would reward employees with the highest productivity growth the most, as they have demonstrated the greatest increase in productivity. Employee 2 with a productivity growth of 16.67% would receive the largest bonus, followed by Employee 1 with 15% and Employee 3 with 10%. This aligns with ACME Co's philosophy of rewarding employees who demonstrate high levels of productivity.