Reference no: EM133045256
Cactus, a local start-up which provides innovative food waste management solutions, has shown a consecutive year-on-year growth exceeding 50%. This stellar performance has put Cactus as one of the fastest growing local companies in Singapore.
Cactus was founded in 2015 by Dr Alex Chang, a young biotechnology scientist. In the first two years, the company comprised 3 bio-technology scientists and 2 laboratory assistants, including Alex. This core team relied on university research funding to design a new generation waste processing unit that could decompose food waste into reusable bio-degradable fuel in half the normal time taken.
With their prototype in hand, Alex and his team met up with potential clients and secured an initial order for 20 waste processing units. A manufacturing arm was set up to deliver on the orders and comprised a team of 25 engineers and technicians. Since then, the company has been receiving a steady stream of orders around the region. The company grew in size over the recent years to cope with expanding business operations. At present, Cactus hires 60 employees, spanning three units - Research and Development, Production and Sales.
Fuelled by the company's early success and the growth of the green economy, Alex set a bold target to be a regional leader in food waste management by 2030 and plans to set offices in Hong Kong, South Korea and Japan within the next three years to expand regional sales and enhance customer support for clients. He also feels that Cactus needs a bigger R&D team to expand the company's product offering.
In view of the talent demands to achieve the long-term business objectives, Alex approached Susan, Head of Human Resource, to restructure Cactus's compensation and benefit policies.
Cactus is currently on a match pay level policy with its market comparator in the niche bio-technology sector. The compensation package for non-sales employees comprises a base salary and an annual performance bonus based on individual and company performance. In lieu of the annual performance bonus, the present 15 sales employees are rewarded basing on a sales incentive plan. The sales incentive plan comprised an individual sales target for each sales representative. The sales target is based on the number of waste processing units, both new and recurring orders, being confirmed by each individual sales representative. The sales representatives are being grouped into teams by different target sectors in Singapore. The sales incentives are paid out in once a year in February after the sales and revenue figures are confirmed and accounting books are closed by the prior financial year-end as at 31 December.
The benefits that are provided to all employees are in compliance with statutory requirements in Singapore and at the median level for industry standards for other non-statutory benefits. At present, Cactus has comprehensive medical benefits that includes both outpatient and inpatient coverage as well as provide for life and accidental insurance coverage. However, the current employees have voiced out that they would like to have other benefits that promotes work-life balance. 50% of the millennial employees' tenure years in Cactus does not go beyond 2 years.
Susan is requested to review and propose changes to the current performance-based compensation components, the current benefits provisions and its international compensation policy in order to meet the business goals for the next 3 years.
(a) Explain the importance of performance-based pay structure by applying ONE (1) motivational theory to support your reasoning.
(b) Recommend TWO (2) new or changes in the performance metrics of the current sales incentive plan in order to better recognise the efforts and contributions of the sales employees. Support your recommendations with an example.
(c) Discuss THREE (3) contextual factors that Susan should consider to develop the new international compensation policy for Cactus.
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