GRAT Authority operates passenger railway service and is also responsible for the maintenance of track signalling equipment, and other facilities such as stations. In recent years it has been criticised for providing poor services to the travelling public in terms of punctuality, safety and the standard of facilities offered to passengers. Last year, GRAT Authority invested over GH¢20 million in new carriages, station facilities and track maintenance programmes in an attempt to address these criticisms.
Summarised financial results for GRAT Authority for the last two years are given below:
Required:
c) Suggest THREE (3) non-financial indicators that could be useful in measuring the performance of a passenger railway service and explain why your chosen indicators are important. (3 marks)
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d) Explain the term short-termism and suggest ways in which a long-term view can be encouraged. (3 marks)
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Short-termism is when there is a bias towards short-term rather than long-term performance.
Steps that could be taken to encourage managers to take a long-term view, so that the ‘ideal’ decisions are taken, include the following:
- Making short-term targets realistic. If budget targets are unrealistically tough, a manager will be forced to make trade-offs between the short and long term.
- Providing sufficient management information to allow managers to see what trade-offs they are making. Managers must be kept aware of long-term aims as well as shorter-term (budget) targets.
- Evaluating managers’ performance in terms of contribution to long-term as well as short-term objectives.
- Link managers’ rewards to share price. This may encourage goal congruence.
- Set quality based targets as well as financial targets. Multiple targets can be used. (Any 2 points)