Introduction
This report focuses on the gross gross revenue function and bonus systems of Houston barefaced 76, Inc. (HF76). First, some background information and strategical objectives of the company exit be provided. Then, analysis will be made on the current gross revenue incentive plan and the proposed naked as a jaybird incentive plan along with some recommendations on implementation of the new plan and other managerial issues.
Company Background
Houston Fearless 76, Inc. is a intermediate size manufacturing company that provides designing, manufacturing, marketing, and servicing of high quality micrographic and photographic products. Customers range from companies in banking, healthcare, and movie industries to goernment entities.
HF76 has different strategic objectives for different products. For products in the emerging and growing markets, sales personnel should identify new customers and new markets. For products in the mature stage, sales pull out should utilize the company brand name and preserve sales in the niche market.
Even though HF76 has roughly $15 million in sales annually, its profit margin has declined over the years and the management is very concerned. The management realizes that the main puzzle of this problem is the mismatch between company objectives and sales force incentives due to inappropriate performance measure and different fee structures for different products.
The Old Sales Incentive System
The old sales incentive system uses a combination plan - a root salary plus commission - to pay salespeople. The base salaries range from $40,000 to $60,000, while the typical commissions earned are most 50% of base salary. A bonus system is similarly in place for sales assistants for reaching the overall sales goal.
The idea of using a combination plan is satisfactory since it provides flexibility by relating incentives to accomplishment of less quantitative objectives, such(prenominal) as customer satisfaction, as well as sales volume. It also provides salespeople with a more stable...
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