What are the problems with contingency pay

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Reference no: EM133312456

Case Study: The company is a regionally-based organization that operates in a five-state region. The states are in the southwest and intermountain region. Sales just topped $250 million and you have just over 1,800 employees. Sales have been stagnant for the past eight to ten years. Some years the company has increases sales just over the inflationary rate and gross margins have decreased just enough to create cause for serious concern.

The president is the founder of the company and has just retired. The new president has done a SWOT analysis and identified that a new pay plan is one part of the new strategic approach to increase sales and gross margins.

After a lengthy strategic planning session, you (HR Director) were tasked with developing an effective pay plan that will increase sales and the gross margin. The goal is to increase sales 5% in the first year, 8% the second, and double digit growth the following three years. Marketing and Accounting have been asked to come up with a buyers and expense plan to increase gross margins with the anticipated increase in sales over this timeframe.

Further, you have been tasked with designing a Contingency Pay plan (Pay-for-Performance). The organization currently uses a seniority and cost of living allowance (cola). You have been given one week to design the plan and meet with the president to review it.

To meet this goal, you will need to identify the key variables needed to make the move away from what the president called "an archaic" approach to pay.

Question 1. Why is it important to change?

Question 2. What is the strategic plan? It must be a workable plan and pay system.

Question 3. What are the motivational theories on which you are basing this new system? You must include your rationale. A hint: a HR colleague mentioned they used the practical application of motivational theories.

For example, the application of Maslow's Hierarchy of Needs, Expectancy Theory, or Equity Theory.

You will need to research motivational theories and find the rationale that best fits this company.

Question 4.What are the problems with contingency pay? What are the opportunities?

Question 5. What labor laws could be a problem if managers are not using the system properly?

Question 6. How will you utilize training for this new system?

Question 7. What is the overall communication plan?

Reference no: EM133312456

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