A Corporation's Incentive Program and ROI Goal

Possible Downfalls of a Corporation's Incentive Program

A corporation has set a goal to increase its return on investment (ROI). To facilitate this goal, the corporation has set up an incentive program that rewards each division for increasing its ROI. One possible downfall of this incentive program is:

1. Cause division managers to compete for the corporation's investment funds.
2. Cause the corporation to select high-risk investments.
3. Cause the corporation to pay out incentives if goals are achieved.
4. Result in managers rejecting profitable projects.

Analysis of the Downfall

One possible downfall of the incentive program that rewards each division for increasing its return on investment is that it may cause division managers to reject profitable projects.

This is because in order to increase return on investment, a division manager may be incentivized to focus on short-term profitability rather than long-term growth. This could lead the manager to reject projects that may be profitable in the long run, but may require a significant investment of resources in the short run.

Additionally, the incentive program may lead to a focus on maximizing ROI rather than overall corporate performance, which could cause division managers to compete for investment funds or select high-risk investments to achieve their goals, potentially harming the corporation as a whole.

Therefore, the correct answer is Result in managers rejecting profitable projects.