The Best Laid Incentive Plan Essay

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The best Laid Incentive Plan
Case Description
The case study presents an interesting concept of organizational behavior and performance measurement systems. The CFO and Chief Administrative Officer of Rainbarrel products, Hiram Phillip was very confident about the changes he brought in Rainbarrel. He had been in the company for only a year and had done lots of infrastructural changes. Some of the changes included cost cutting in budget, headcount reductions of 10 % across all units, introducing the ‘wall of shame’ policy for customer care representatives, on time shipment policy. He felt, according to his metrics and figures, he had single handedly improved the company’s performances by leaps and bounds. And today was the day where he
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After Hiram Phillips evaluated the company he developed a Performance Management System that would enhance business performance for Rainbarrel Products. One year after the Performance Management System was put into action, Rainbarrel Products showed incredible results. Strengths of these results were reduction in labor costs, costs reduction on commission sales to employees, and clarifying job agendas to each area of sales showed incredible changes. There was evidence of lower costs as a result of higher productivity and improved customer service quality, as well as an increase in the number of on-time shipments being shipped. The reason these strengths were showing up was because no reliable performance measuring metrics was used. The metrics used by Hiram were too focused on number and too narrow. The eccentric of the performance management was cost reduction. Rewards were based on pay for performance, for example you pay the sales folks only on sales, and there may be more sales, but it may be at bad prices or more returns of goods later. The rewards were extrinsic rather than intrinsic. Extrinsic rewards fails to motivate employees and this is what exactly we see in the case. The new policies pushed people to beat the systems like shipping products on due date so that their performance metrics was not affected but their products were lying outside the manufacturing plant, or not to open their emails until they know they cannot
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