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Supplement to case 116004. This case study explores the challenges of aligning middle management interests with company goals as a company navigates rapid growth in a dynamic industry. China Lodging Group, a Chinese hotel chain that opened about 2,000 hotels during its first decade in business, uses Balanced Scorecard (BSC) metrics to promote both consistency of service and an entrepreneurial attitude amongst hotel managers. The company needs to encourage its managers to operate according to company-level values and goals, without gaming the BSC metrics for short term rewards or without focusing exclusively on local, narrow results. This case illustrates how executive teams can develop incentive systems that increase managers'sense of ownership and commitment to company values and goals.

This case study explores the challenges of aligning middle management interests with company goals as a company navigates rapid growth in a dynamic industry. China Lodging Group, a Chinese hotel chain that opened about 2,000 hotels during its first decade in business, uses Balanced Scorecard (BSC) metrics to promote both consistency of service and an entrepreneurial attitude amongst hotel managers. The company needs to encourage its managers to operate according to company-level values and goals, without gaming the BSC metrics for short-term rewards or without focusing exclusively on local, narrow results. This case illustrates how executive teams can develop incentive systems that increase managers'sense of ownership and commitment to company values and goals.

Dow Chemical is one of the few major American industrial corporations that was founded in the late 19th century that is still in existence. From its origins producing bromine out of the brine underneath Midland, Michigan, the company has evolved from a diversified commodity chemical company to an advanced materials company whose products and services can make its clients more sustainable. During the 1960s and 1970s the company received a series of external shocks in the form of negative public opinion for some of its activities. These challenged the company's perception as being a'good company'and made it realize it needed to more proactively seek outside perspectives on how the company was viewed and what it should do. This led to the formation of the Corporate Environmental Advisory Council in 1992 which was renamed the Sustainability External Advisory Council (SEAC) in 2008. With substantial input from the SEAC, the company set two ambitious sets of ten-year goals: 1996-2005 and 2006-2015 and was largely successful in meeting them or on the way to doing so. In 2011, Neil Hawkins, Vice President of Sustainability and EH&S (Environmental, Health and safety) is trying to decide what the content and format of the next ten-year goals should be to ensure the company's viability on its 200th birthday. Should they be incremental goals like the ones for 2005 or ambitious stretch targets like the ones for 2015? Or should they be broad statements of principles that encourage innovating for sustainability throughout the company? A further challenge facing the company that it was rapidly globalizing with a large portion of its workforce outside its Midland, Michigan headquarters, making it even more difficult to preserve a common culture and commitment to sustainability.

Robert Venter, second-generation Chief Executive (CE) of family-owned Allied Electronics Corporation Ltd (Altron), considered the pros and cons of more clearly linking the firm's compensation system to sustainability performance. In June 2011, Altron, a conglomerate headquartered in Johannesburg, South Africa, controlled more than 200 companies in Africa, Europe, the US, the UK, Australia, and the Far East. More than 14,000 employees designed, developed, manufactured, and marketed a range of telecommunications, electronics, power electronics, and information technology systems and products. Having made a clear commitment to sustainable development, Venter was confident that the commitment was shared across the senior management team. However, there appeared to be more acceptance in the operating units for meeting financial targets than for meeting sustainability targets. Did the existing incentive structure send the correct message about the sustainability-oriented corporate strategy? Looking at the reshaped strategic themes, Venter considered the pros and cons of more clearly linking the firm's compensation system to sustainability performance.