Reference no: EM134011563

Question

Case Study: Executive Compensation: The Case of Ontario Hospital Executives

Done-Deal Paper Inc. operates throughout Western Canada with offices in Calgary, Saskatoon, and Vancouver. Providing paper and paper needs to most of Western Canada, Done-Deal is one of the top two competitors in the area.

In January 2018, Conner Carell, office manager of one of the branch offices for Done-Deal, somehow convinced company President and CEO Bailey Zucker that they needed to change the way their sales representatives were incentivized. He argued, "putting our sales reps into teams will not only increase cooperation, but it will increase sales ... right now there are too many sales being lost that could have been won through a team effort." Most of the time, sales made to clients required multiple interactions by multiple reps anyway. Bailey agreed with Conner and pointed out that teamwork can also improve morale and synergy. Based on these assessments, Conner organized his 20 sales reps into 4 teams of 5 reps. Sales teams would pool their commissions regardless of who initiated and worked on the sale. After the first year of this team-based incentive program, sales commissions across the four groups varied dramatically. For instance, the highest paid employees in a team made, on average, $50,000 more than the lowest paid team members.

During August 2018, Conner sent to all 20 sales reps a survey requesting feedback on the satisfaction with teams and, specifically, the team-based incentive rewards program. Although the survey results were generally positive, not everyone was happy in the office. Problems could be grouped into the following categories:

Some sales representatives believed that various team members did not "buy into" the team concept and were simply "free riding"-benefitting from the efforts of higher-performing reps.

There was a general feeling that some teams were assigned difficult regions that prevented them from achieving higher sales.

Teams did not always display the motivation and synergy expected because "bickering" was prevalent between stars and their lesser-performing peers. Average performers complained that star reps made them look bad.

At least a third of the sales staff felt the incentive rewards program was unfair and asked for a return to individual sales incentives.

Questions:

1. Are CEOs and key executives worth the large pay packages they receive? Explain.

2. Do you agree with Peter Drucker that corporate executives should receive compensation packages no larger than a percentage of the pay of hourly workers? Explain.

3. Do you think that executives in the broader public sector, such as hospital executives, should receive such large pay packages?