Current production targets and strategic decisions by corporate managers

John S. Hughes, Alex Thevaranjan

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

This article considers the potential role of current production targets in providing corporate managers with incentives for allocating their efforts toward operational and strategic decisions. Operational decisions relate to current production, while strategic decisions affect both current production and future profitability. A moral hazard exists to the extent that manager effort allocations are not observable. Of interest is the design of compensation contracts which efficiently resolve that hazard. Attention is mainly focused on distortions in current production away from targets which would be optimal if manager effort allocations were observable. The principal insight is that an increase in current production targets may, paradoxically, be motivated by a desire to induce a greater allocation of effort to strategic decisions.

Original languageEnglish (US)
Pages (from-to)321-329
Number of pages9
JournalJournal of Operations Management
Volume12
Issue number3-4
DOIs
StatePublished - Jun 1995

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

Fingerprint Dive into the research topics of 'Current production targets and strategic decisions by corporate managers'. Together they form a unique fingerprint.

Cite this