Compensation_Plan

InterClean Sales Team Compensation Plan Proposal to: Janet Durham, Vice President of Human Resources Other Human Resources Managers From: Brenda Knox, Midlevel Sales Manager Re: Proposed Compensation Plan for new InterClean Sales Team The success of the merger between InterClean and EnviroTech depends on communicating and implementing a compensation system that addresses the needs of both the former EnviroTech and the InterClean sales personnel. This proposal outlines the organizational reward system I recommend InterClean adopt for the new sales teams. It is imperative that the perception of the compensation and benefits package be fair and equitable by team members. This proposal includes a brief synopsis of the pay systems currently used to compensate my team members, and the components of my proposed pay-for-performance system and why I believe it will be effective. An objective of the compensation package is to motivate my team to reach peak performance while accomplishing InterClean’s strategic goals. My plan provides significant benefits to both the individual employee and to InterClean. Cascio (2006) asserts “pay for performance is the new mantra (p. 415)” and I encourage InterClean to adopt and embrace this philosophy of adopting programs to motivate employees and reward performance. My team is six members, not including myself, Susan Burnt, Shane Huck, and Dennis White are from Interclean and classified as sales representatives. They are paid on a straight commission. Eric Borden and Ving Hsu are senior sales specialists from EnviroTech and they are paid a base salary and eligible for the sales bonus program. Tom Gonzalez is a sales manager from EnviroTech and is paid a base salary and eligible for the sales bonus program. My proposal includes offering my team members a base salary with an ability to supplement base salary with both team and individual bonus awards. I reviewed base salary information published by the United States Bureau of Labor Statistics (2009) on their website and job specific salary information from Salary.com (2010). I recommend the following base salary ranges: Sales Managers (could also include the Sr. Sales Specialists) $95K - $209K, and Sales Representatives- $49K - $109K. I do not have the specific information for each team member in regard to his or her total compensation packages, but request involvement and to be present when the HR representative talks to each individual. It is important that each employee’s compensation be at least at the same level as before the merger. The base salary determination needs to address the changing strategic goals of InterClean and realize that the new strategy will require high levels of commitment from each individual. The sales staff involvement not only in selling activities but also in other non-selling activities such as meetings, learning the new products and services, training for compliance and environmental regulations, and networking activities that eventually will result in sales, need recognition. The base salary component of the proposed plan embraces and recognizes these efforts. In addition to the base salary, I propose four types of bonuses to use as rewards for performance. Cascio (2006) contends that “most experts agree that employees don’t begin to notice incentive payouts unless they are at least 10 percent, with 15 to 20 percent more likely to evoke the desired response (p, 417).” For that reason, I propose a team bonus program with a bonus pool equal to 10% of the team members’ collective salaries and an individual bonus program with an eligible bonus amount of 10% of base salary. We spent a significant amount of time creating easy, efficient and comprehensive team evaluation and individual evaluation tools. We will use these tools to determine bonus payouts for both the team and the individual members. I suggest quarterly bonus payments to coincide with my quarterly individual evaluation with each of my team members. My proposed plan requires team participation in determining how the team bonus is allocated. Team member input will help mitigate the issue of top performers growing disenchanted from carrying “free riders” (Cascio, 2006, p. 444). I also request that executive management looks at creating a profit sharing program for the entire company. Research indicates that profit sharing has a positive impact on productivity. In firms with profit sharing, productivity was three to five percent higher than in those companies without profit sharing plans (Cascio, 2006). The last bonus component of the compensation plan is the spot bonus. This is a discretionary bonus fund that I can access to reward my team or an individual as I deem appropriate. Spot bonus awards will be anywhere from $25 to $2500 in value. The second part of my compensation plan includes indirect financial rewards or benefits. My recommendation is to review InterClean’s benefits package and EnviroTech’s package and harmonize upwards. According to Anonymous (2007) many mergers are not successful because of the lack of consideration of the benefits implications for the merged employees. Harmonizing upwards provides employees with the best of both benefits package. For example, if InterClean vacation benefits are 15 paid days off and EnviroTech had 18 paid days off per year, we need to give employees of the merged companies the benefit of 18 days. In addition, I propose InterClean adopt a very strong slate of Family-Friendly benefits; including telecommuting and childcare. Family-Friendly benefits help employees balance their work and family lives. According to a survey conducted by the Society for Human Resources Management, Family-Friendly benefits rated number one in benefits preferred by employees (Sands & Harper, 2007). I realize a quality benefits package is costly; however it is important to convey a message of caring and responsibility toward our employees. I agree with Anonymous (2007) assertion that employees “will naturally be anxious (p. 5)” about the merger and “many will want no changes to their compensation and benefits unless there are improvements (p. 5).” I must briefly mention the third component of my total rewards compensation package: nonfinancial benefits. Many times we forget or subordinate nonfinancial rewards to the primary compensation and benefits package. Cascio (2006) makes a good point by saying “while money is obviously a powerful tool used to capture the minds and hearts of workers and to maximize their productivity, don’t underestimate the impact of nonfinancial rewards (p. 418).” The nonfinancial benefits important to my team include a supportive corporate culture, training and development opportunities, involvement in decision making, and recognition. My organizational reward system provides substantial benefits to both the individual employee and the corporation. The primary benefits to the individual include: • Individuals are rewarded for efforts and results and share in the success of the corporation. • Providing Family-Friendly benefits increases employee productivity and his or her perception of organizational support (Sands & Harper, 2007). • Proposed system also rewards intangibles and hard to measure responsibilities. Corporate benefits include the following: • The proposed variable pay system facilitates cost control. If business increases, more pay goes to the employees, if not the company is not locked in to the higher labor costs (Cascio, 2006). • “Offering employees flexibility with how their work get done” can conceivably lead to a higher return on assets and return on equity (Sands & Harper, 2007, p. 118) • The proposed compensation system can be used as a motivational tool and a means of reinforcing strategic goals and objectives (McColl-Kennedy, Kiel, and Dann, 1993). By approving my proposed organization reward system, InterClean will embrace the philosophy of pay-for-performance, and create a sales force motivated to achieve our strategic goals. I support Cascio’s (2006) contention that “compensation plans need to be tied to an organization’s strategic mission (p. 420)” and encourage InterClean to form a team to define measurable strategic goals and incorporate these goals into the final compensation and benefits program. It is important that our employees are not monetarily harmed during this merger. The training program, individual development plans, and appraisal system already developed will support and complement my proposed reward system. InterClean will be paying for performance and achieve dominance in the marketplace. References Anonymous, . (2007, March/April). Manage compensation and benefits during mergers. Strategic HR Review, 6(3), 5. Cascio, W. (2006). Managing human resources: Productivity, quality of work life, profits (7th ed.). New York: McGraw-Hill. McColl-Kennedy, J. R., Kiel, G. C., & Dann, S. J. (1993). Money or motivation': compensating the sales force. Marketing Intelligence & Planning, 11(1), 13-19. Salary.com, Inc.. (2010). Salary.com. Retrieved from http://salary.com/ Sands, J., & Harper, T. (2007, Spring). Famliy-friendly benefits and organizational performance. Business Renaissance Quarterly, 2(1), 107-125. U.S. Bureau of Labor Statistics. (2009). Occupational Outlook Handbook, 2010-11 edition. Retrieved from http://data.bls.gov/oco