Introduction
As one of the divisions of Hawthorne Corporation, Limited (Hawthorne), General Merchandise (GM) earns about 63.86% of Hawthorne’s annual revenue. All of the 450 GM stores are operated as dealer owned and operated franchises. Strategically, Hawthorne’s GM division is formed to attract more hobbyist and commercial businesses, and to reinforce the entrain barrier of Canadian market for the US competitors. During the mid-1990s, Hawthorne realized that its GM division is not addressing the needs of the two key customers segments in the automotive parts industry – ‘do-it-yourself’ hobbyists and commercial consumers. Plus, the fact that Hawthorne’s commercial consumers dislike its expansion of stores, Hawthorne has decided to open a
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According to Bachand, the stores need to be retail friendly and service oriented as demanded by both the targeted customer groups of PK. Hence, the bonus system could potentially lose track of the objectives of PK – to be the most recommended auto part store in Canada. For example, if a customer had a bad experience with on the store because of bad customer services, he/she is unlikely to recommend the store to anyone. In fact, a study has shown that people talk about their bad customer experiences more often than the good ones. This could hurt what PK is trying to achieve.
To better represent the amount of work a manager is doing instead of a franchisee, a bonus system is definitely needed. However, we would recommend Bachand to modify the bonus system, to better motivate and direct the managers towards the overall objective of PK.
The bonus system should not only based on meeting and exceeding budgeted profitability, but also based on the evaluation of mystery shoppers on subjective goals, such as good customer service and experience staff, ect. A simple point system can be considered as way of quantifying the managers’ bonus. This way not only can see how well a manager is doing profit wise, but also how good they are doing in other aspects as well.
4. Should Hawthorne move to the corporate-owned store model for PK retail stores? Why?/why not?
Exhibition Exceed Budget by | Points | | Mystery Shopper Evaluation | Points | 0% | 1 | |
A well-planned gainsharing plan is essential when implementing the bonus program. First, a plan should include elements of employee involvement. It is important that management gain employee
For example, the colors and points system is complex because it is difficult to connect colors and points to the bonus points and the 40% multiply factor may cause managers' confusions. Since it is hard to understand, the scorecard would have problems on acceptance and the implementation process would be difficult. As a result, the scorecard would not reach the maximum effectiveness and efficiency. The second problem is that the scorecard contains uncontrollable factors for managers. For example, managers' performance will be measured by comparing the budgets and actual expenses. However, hotel level managers have no right to determine the budget and this measurement is unfair. As a result, many managers would be reluctant to accept the scorecard. The third problem is that the scorecard is only implemented at the hotel-general-management level. As stated in the case, the hotel-general-management is the last level of the company management and they have no right to discuss the components of the scorecard. In addition, the implementation process lacks communication between different levels of managements. As a result, the scorecard represents the top managements' thoughts and may not be suitable for the bottom level management. Also, the lack of communication may cause hindrance for accepting and implementing the scorecards.
Pay and reward systems exist in the form of pay, bonuses and benefits, financial and non-financial and designed to improve performance, increase motivation, staff retention and increase profitability. Appreciation and gratitude is widely received as reward and the opportunity for training and development for career progression.
b. The overall profit would be a function of the customer’s satisfaction level. Hence a profit
A few weeks earlier, John M. Case, board chairman, president, and sole owner of the
Supervisors must understand the incentive pay process in order to support and administer it. Oftentimes, a lack of understanding causes managers to ignore or adapt the process as they see fit. Moreover, if supervisors are not trained on how to measure performance, the process will not be standardized across the company. (Gordon, Kaswin)
KYCRB could tie its current reward system to a performance management system after they creating one in place. The rewards given are tangible and intangible returns that are benefiting and satisfying their employees for example cash compensation. However, the new performance management system will let employees be aware of their performance in the organization and allow them to gain more rewards such a recognition and status, employment and security and learning opportunities for their active and dedicated performance. Nevertheless, with the performance system being fair presents perception of distributive Justice so workers are rewarded base on work. It will increase motivation to perform within the organization. If the environment is a
Parts Emporium Inc. managed to transform itself from doing business out of a garage to becoming the largest independent distributor of auto parts in the north central region. In the past period, inventory capacity rose from 65% to 90% and sales growth has stagnated causing Parts Emporium to hire an outside manager to figure out where the problem lies.
While Hawthorne believed that the PK business has the potential to be tremendously profitable, Hawthorne had always wanted to pursue a corporate store model for PK. In early 2005, Hawthorne was able to renegotiate the contract with general merchandise stores gaining the flexibility to pursue a corporate-owned store model. In August 2005, Kevin Bachand, as the newly appointed Ontario operations manager, was expected to provide his expertise in the planning, launch and ongoing operations for three corporately owned Part King stores.
2. Compares the returns of the asset to the market over a period of time (Beta)
Reward Management (RM) has been defined as the distribution of monetary and non-monetary rewards to employees in an effort to align the interests of the employees, the organisation, and its shareholders (O’Neil, 1998). In addition O’Neil (1998) also suggests that a RM system can serve the purpose of attracting prospective job applicants, retaining valuable employees, motivating employees, ensuring legal requirements relating to direct and indirect rewards are not violated, assisting the company in achieving human resource and business objectives, and ultimately assisting the organisation in obtaining a competitive advantage.
Traditionally, the business performance of each regional manager is measured against a set profit plan, with Jacques rewarding his managers a fixed payout of 2% of corporate profits as a bonus. However, the organization is facing many business firsts, which when
The primary reason why Ford designed the VEP was that Ford believed its stock was undervalued and the undervalued stock was limiting the company 's ability to use its stock for acquisitions or to attract, retain or incentivize employees. Ford thought the VEP would enhance the value of its outstanding shares because the recapitalization will highlight its cash reserves and cash flow generating capacity, and also indicates management 's confidence in the future of the business. In addition, Ford believed the adjustments in the employee incentive plans by the recapitalization will tie Ford management 's compensation even more closely to the performance of its stock price.
We believe the new incentive system was needed and reasonable because the accounting-based incentive system, where EPS was a measure of performance, raised valid concerns. The first being an agency problem. This existed within the old system as manager’s interests were not aligned with those of stockholders. EPS had improved steadily at a rate of 9% annually; however, the share price had increased only slightly in comparison. Therefore, the company’s stockholders had hardly benefited. The second issue was the use of subjectivity in granting bonus awards. These awards were given out even when their entity had not performed well. Managers began “politicking”, meaning they would try and convince their evaluators they performed better than the results had shown.
Performance based bonus system (PBBS) is a type of incentive scheme used to motivate employees and thus contribute to the achievement of company’s objectives. This assessment will aim to discuss the effectiveness of the system implemented by Pok and advise him on other possible methods of motivation.