Problem Statement Harwood Medical Instruments PLC (HMI) manufactures specialty medical instruments. The incentive compensation scheme was based solely on operating profit and did not take into account any other key performance indicators. HMI instituted a new bonus plan that takes into an account a more balanced scorecard approach and is based on operating profit and other key performance indicators. The problem in this case is whether the new bonus system is successful and whether it is the most appropriate incentive program for the company.
Case Data Harwood Medical Instruments PLC is based outside Birmingham, England and manufactures specialty medical instruments. The company is organized into nine separate divisions each run by
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Scrap and Rework Cost Reduced by excess of scrap and rework costs over 1% of operating profit.
Customer Satisfaction Ratings Reduced by $5,000 if average customer satisfaction ratings were below 90%
What if final amount is negative No bonus is paid and it is not carried forward
Exhibit 3 – Division Managers Bonus for half-year period under Alternative 3
Base Bonus 1% of operating profits
On Time Deliveries Increased by $20,000 if over 97% of deliveries are on time.
Increased by $10,000 if 95% to 97% of deliveries are on time.
No increase if on time deliveries are less than 95%
Sales Returns Increased by $10,000 if sales returns are less than or equal to 1% of sales.
Decreased by 50% of the excess of sales returns over 1% of sales
Patent Application Increased by $2,000 for every patent application filed.
Scrap and Rework Cost Reduced by excess of scrap and rework costs over 1% of operating profit.
Customer Satisfaction Ratings Increased by $20,000 if average customer satisfaction ratings are above 95%. Increased by $10,000 if average customer satisfaction rating is above 90%. Reduced by $5,000 if average customer satisfaction ratings were below 90%
Special Indicator determined and specific for individual divisions. $20,000 if objective is met.
For the Surgical Instruments Division the agreed indicator is 95% customer satisfaction.
For the Ultrasound Diagnostic Division the
2. Increase customer satisfaction ratings by .5 point each year until the average is 4.5 overall for customer satisfaction rating
The price increase must be enough to cover the additional fixed cost, so we just need to know what that fixed cost is per copy sold. This equals the additional fixed costs / number of copies sold.
Appeal: Against Harwood’s conviction of murder as a secondary offender. Harwood argued that as the jury were not instructed in relation to manslaughter, ‘a miscarriage of justice’ had occurred.
Within this business report, I have analyzed three different employee compensation strategies that I feel could be well executed within our organization. Employee compensation is key to
A Performance-Based Pay system is an increasingly popular compensation method used by organizations to increase productivity. A goal for all companies is to try and remain competitive and control costs, this is a reason for performance-based pay systems becoming more popular. This type of system attempts to link compensation to performance. (Gena Richter, 2002) These systems are directly tied to organization or individual performance and are most effective when based on objective measures of quantity or quality of performance. If we wish to have a direct impact on work motivation, it must be linked directly to the performance of desired behaviors. In order for to put this type of system into place, performance evaluations must be conducted regularly , as well as training and development for those with performance that isn't quite up to par. These additional resources will be necessary for our organization if we implement a performance based pay system. (William B. Bernathy, Ph. D., 2004)
The performance-pay compensation plan that was proposed implemented a number of aspects of the Expectancy Theory to encourage intrinsic and extrinsic motivation in order to make positive gains for both the MGOA and the MGH. There were four main aspects of the plan that had changes implemented: Physician Base Salary, Development Fund Tax, Bonus, and
A well-articulated compensation philosophy drives organizational success by aligning pay and other rewards with business strategy. It provides the foundation for plan design and administration and anchors current and future plans to the company's culture and values (Kaplan, 2006, p.32). Recognizing and rewarding achievement is the cornerstone of the company A’s compensation philosophy. The mission of the company is to attract, select, place and promote all individuals based on their qualifications. The company believes that performance-based compensation helps attract, develop and retain talented professionals. In addition to base pay which based upon local market conditions and targeted to be above market, the company provides the following types of potential compensation to reward performance:
The mandate for the Homewood Institution is as followed. This Psychiatric Health institution has a national mandate that provides highly specialized care to all its individuals residing in Canada. They accept referrals from areas all over the world, however; even though the admission process is similar for all patients, the overall cost may vary depending on the approval of provincial health ministries and the type of accommodations needed for that patient.
14. compensation package, the number of plants, and the installation of upgrade option D. b.the size of the incentive payment per non-defective pair produced, spending for best practices training, spending for TQM/Six Sigma quality control, the
In order to appropriately recommend an incentive plan, one must first identify the main issues with operation at Howe 2 ski. Howe 2 Ski has experience increased competition resulting in a decreased market share. Smaller market share increases the negative impact a lack of productivity and customer dissatisfaction has on Howe 2 Ski’s profits. The decreased production of both the molders and Sales-Persons result in increased inventory and higher cost of production. Furthermore, Howe has attempted to establish an incentive pay program that has served to be ineffective and has fostered low morale within the organization.
* Variable costs: Assumed from exhibit 6. It will increase the same 8% as the variable revenue.
“Let’s wrap things up”, Mary said. Timothy, Tracy, and Mary were all in the process of closing Wal-Mart tonight for work. Timothy was grabbing his keys to head to the door when all of suddenly the doors slammed shut and locked. Mary, Tracey and Timothy all shot each other a petrified look. Not knowing what’s going on they try to get a hold of their manager only to find out they have no signal. While trying to brainstorm on what to do they hear the intercom come on. “Let’s play a game, hide and seek last one alive wins.” They all look at each other with frightened looks. Timothy says, “Let’s try getting out of here again.” When they look at the doors again they realized someone locked it with chains from the outside. Mary says, “I know there
Thus, we can concluded that the best response goes to hourly rate at $733 with around 10% increases in sales volume and extra revenue increased for $2664 with income improved by $2096 while other variables assuming contains. However, aims to turnaround the situation on shortfall in income, price adjustment to stimulate
One of the important aspects of business management is having a proper compensation system. Compensation ensures that the staff of the company obtains the results of their efforts. Compensation is a cost to the enterprise and, therefore, a proper remuneration model must demonstrate its ability to produce returns. Also, since compensation is what the employees get in exchange for their services, the type used must be one that will motivate the employees (Belcourt & McBey, 2015). Henderson printing company is a mid-level company. Therefore, it requires a very critical remuneration system that will help it to survive. This memo explores the compensation models that Henderson printing operates as well as suggests the necessary changes.
An incentive pay program can reward employees who continue to produce superior work or encourage employees who already produce good work to best. Sometimes, use an incentive system when employees are lack of enthusiasm of getting down to work and improving things. If everyone in the same job classification gets the same pay, there is no real incentive to do an outstanding job (French, 1990). Various incentive plans used to motivate all employees such as production staff, sales staff, administrative staff and managerial and professional staff on an individual basis. To be improved employee work performance, the incentive pay programs need to be fairly matched with the employees’ expectation. Properly designed and maintained incentive pay program has the potential to increase employees’ productivity and work performance.