You are responsible for a large department at your organization. A new management incentive program is being discussed and you are meeting with the Chief Financial Officer regarding each of the possible options.
One of the pieces that needs to be settled is the basis for the incentive plan. There are four options on the table: Return on Investment, Residual Income, Economic Value Added, and Return on Sales.
Explain each of the four calculations. How do they differ?
Choose the method you think would be best suited to measure the performance of managers. Provide the rationale for your decision.