The Crimson Press Curriculum Center

First Page and the Assignment Questions:
When he took over as CEO of the Kooistra Autogroep in 2002, Tom Kooistra made significant changes to his company's management control system. Most significantly, he decentralized decision-making authority, developed a performance reporting system that included both financial and nonfinancial information, and introduced a pay-for-performance system for the company's dealership and department managers. Tom explained:

My father had been running this company like a family, but we've become too big to operate like this. Besides, we need to be more competitive to survive. That's why I am so keen on implementing the new pay-for-performance plan. With decentralization comes accountability for performance. If our people are willing to accept that accountability, then I am quite willing to share with them a fair proportion of the company's success.

But while the company's managers seemed to value the increased authority and performance-related information, their feelings regarding the pay-for-performance system were mixed. In 2007, Tom was considering whether he should try to reinforce the system by telling the managers that the system was here to stay and that they needed to learn how to make it work, or whether he should revise, or possibly even abandon, the system.

THE COMPANY
Kooistra Autogroep was a family owned automobile retailing company founded in 1953. Over the years, Kooistra grew from a small company that sold and serviced cars of only one or two brands from a single location to a top-20 player in the Dutch car dealership market. In early 2007, it owned and operated 13 dealership locations selling 10 brands of automobiles and employed approximately 325 people.

The Kooistra dealerships were located in the city of Tilburg and in smaller surrounding towns in the southern part of the Netherlands. Kooistra owned five Opel dealerships, three Toyota dealerships, one Citroën dealership, one Suzuki dealership, one Saab dealership, one Alfa Romeo dealership, and one combined Chevrolet, Cadillac, Corvette, and Hummer dealership. Opel (a brand of General Motors) had been the market leader in the Netherlands since the 1970s, with a market share of almost 10% in 2006. Toyota was the sixth largest brand, with a 7% market share. Citroën had a market share of 4% and Suzuki and Chevrolet had market shares of about 2-3%. The other brands sold by Kooistra-Saab, Alfa Romeo, Cadillac, Corvette, and Hummer-all had market shares of less than 1%. For these smaller brands, the nearest competing dealership was typically located far away. In addition to the car dealerships, the Kooistra Autogroep also owned a body repair shop and a car lease company.

Assignment
1.   Did Kooistra Autogroep management go too far in decentralizing the organization? Did they not go far enough? Or did they get it just right? Why?

2.   Evaluate the budgeting, performance measurement, and incentive systems used at Kooistra Autogroep. What changes would you recommend, if any?

3.   (When used in conjunction with Puente Hills Toyota.) When comparing the use of incentives in the Puente Hills Toyota and Kooistra Autogroep cases, do you believe that incentive pay is truly effort-inducing; that is, drive employees to perform at their best? If you believe incentive pay is not, in whole or part, effective in making employees work harder, then what other po-tenurially useful purposes does variable incentive pay provide for organizations relying on it, if any?