The best laid incentive plans

CASE ANALYSIS

Section 3 Group 15 Apurv Mittal – FT153025 Survesh Chauhan – FT153047 Naveen K. – FT153066 Mukesh Shah – FT153090 Sumit Arora – FT153107 Gagandeep - FT153114

Situation Before Hiram  Ten years of continuous growth due to good

economic conditions  Company was “Fat and Happy”  Then came the economic slump and Rainbarrel could not cope with it.  They were slow to react due to their indiscipline and lax attitude.

Hiram‟s Vision  Focus on cost reduction via “Lean and Mean”.

 He reduced labor cost by forced layoffs - 10%

reduction in all units.  Improved call center metrics.  He brought in “Wall Of Shame”.  New metric of measuring customer service was brought in.

Hiram‟s Vision Contd..  Standardized the meaning of the term „shipping‟

 Consideration of selling price as a measure of

commission to sales people.  Removed the confusion in the minds of the sales personnel.  Bottomline - Keep things simple.

Unexpected Backlash  Employee developed tendencies to find loopholes.

 Employees started filing patents which were

commercially non-viable.  The current and retired employees were cold shouldered by the sales people.  Layoffs were reducing happiness.

Unexpected Backlash Contd..  The headcount reduction was the target and not the

cost.  Firing of low performing employees was crippling the company.  Even high performing department had to lay of high performing individuals.  Long term customers were getting disgruntled.

Contd..  Stocks were not getting replenished.

 Stuff was lying on the railroad siding outside the

warehouse.  Customer service personnel were in hurry to hang up the phone calls from customers.  Hence multiple calls were required to resolve a single issue.  In short, Hiram had lot of thinking to do.

Experts‟ take on this case •

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Make shipping efficient rather than faster. Layoff increases costs of hiring too. It is very difficult to define a right metric. Compromising long term businesses for short term operating gains. PMS should be launched as a pilot .

Contd.. •

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The employees were humiliated due to Wall Of Shame Introduction of intangible reward system. Top performer need to be nurtured as they are 50% more productive than other. The pay for performance was illogical game.

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