China Resources Corporation

C. Budgeting: What role do balanced scorecards and strategy maps play in the budgeting system? Are they necessary?

Balanced scorecards and strategy maps help to ensure that profit centers are more closely alligned with the goals of CRC when drafting their budgets. The balanced scorecard is the method by which central management can communicate KPIs to subsidiary management, as well as measure their ability to meet those indicators. Strategy maps then play the role of requiring profit center managers to explain their choices in resource allocation as a means of deterring uncertain or unfocused budgeting practices. Both aspects of the budgeting system are necessary because they work together to provide accountability and measurable data for future review.

D. Internal auditing: What role does internal auditing play in the 6S management system? Is it necessary?

Given the large number of subsidiares owned by CRC, as well as the trouble in keeping them all reigned in, the internal auditing mechanism is a crucial component of the 6S management system. The role of CRC internal auditors is to monitor the operations and activities of profit centers to help ensure that subsidiary managers are compliant with and focused on CRC business strategy. Jiang Wei mentions that in one case, a profit center lost HK$100 million through gold speculation, which was an activity that was never endorsed by CRC (Campbell & Lane 6). With internal auditing, CRC creates more certainty that profit centers will be operating in accordance with central business strategy, thereby producing more predictable financial figures.

E. Performance management: How are strategy, incentives, and performance linked via the performance management system?

The performance management component of the 6S system is designed to lay out a clear economic strategy for profit centers and incentivize managers to work towards specific goals by placing their bonuses at stake. More specifically, managers can earn up to 70% of their bonuses by reaching performance goals laid out by CRC through yearly “performance contracts” (Cambell & Lane 8). Additionally, subsidiaries are futher inclined to follow central strategy as managers have the opportunity to purchase a company share if profit centers can beat sales growth by 15%, shareholder return by 12%, and increase market capitalization from the previous year. Overall, the performance management system encourages profit centers to be as compilant and profitable as possible by rewarding managers for acting in the best economic interests of CRC as a whole.

F. Manager appraisal: Is the manager appraisal system necessary when the performance management system is already in place?

The manager appraisal system is necessary for the 6S strategy because it works together with