Many organizations are concerned about the rising cost of employee benefits and question their value to the organization and to the employees. In your opinion, what benefits are of greatest value to employees? To the organization? Why? What can management do to increase the value to the organization of the benefits provided to employees?
When OSHA was enacted in 1970, it was heralded as the most important new source of protection for the U.S. worker in the second half of the twentieth century. From the information in this chapter, what is your opinion about the effectiveness or the ineffectiveness of the act? Should it be expanded, or it should businesses have more freedom to determine safety standards for their workers?
Case Study 5.1 4 pages
There are two (2) case studies per chapter. You are to respond to one (1) case from Chapter 9 and one (1) case study from Chapter 10.
Chapter 9 – Managing Compensation: (Choose one case study)
Case Study 1 – Pay Decisions at performance Sport, pg. 377 and answer the questions
Case Study 2 – An In-N-Out Pay Strategy: Costa Vida’s Decision to Boost Pay. pg. 378 and answer the questions
Chapter 10 – Pay for Performance: Incentive Rewards (Choose one case study)
Case Study 1 – United States Auto Industry Back on Top…of CEO Pay, pg. 413 and answer the questions
Case Study 2 – Team Based Incentives: Not Your Usual Office, pg. 414 and answer the questions
Weekly Summary 5.1
Write 2 pages from the chapter 9 and chapter 10 attached PPT
Chapter 9: Managing Compensation
Case Study 1: Pay Decisions at Performance Sports
Katie Perkins’s career objective while attending Rockford State College was to obtain a degree in small
business management and to start her own business after graduation. Her ultimate desire was to
combine her love of sports and a strong interest in marketing to start a mail-order golf equipment
business aimed specifically at beginning golfers.
After extensive development of a strategic business plan and a loan in the amount of $75,000 from the
Small Business Administration, Performance Sports was begun. Based on a marketing plan that stressed
fast delivery, error-free customer service, and large discount pricing, Performance Sports grew rap- idly.
At present the company employs 16 people: eight customer service representatives earning between
$11.25 and $13.50 per hour; four shipping and receiving associates paid between $8.50 and $9.50 per
hour; two clerical employees each earning $8.25 per hour; an assistant manager earning $15.25 per
hour; and a general manager with a wage of $16.75 per hour. Both the manager and assistant manager
are former customer service representatives.
Perkins intends to create a new managerial position, purchasing agent, to handle the complex duties of
purchasing golf equipment from the company’s numerous equipment manufacturers. Also, the mail-
order catalog will be expanded to handle a complete line of tennis equipment. Since the position of
purchasing agent is new, Perkins is not sure how much to pay this person. She wants to employ an
individual with five to eight years of experience in sports equipment purchasing.
While attending an equipment manufacturers’ convention in Las Vegas, Nevada, Perkins learns that a
competitor, East Valley Sports, pays its customer service representatives on a pay-for-performance
basis. Intrigued by this compensation philosophy, Perkins asks her assistant manager, George Balkin, to
research the pros and cons of this payment strategy. This request has become a priority because only
last week two customer service representatives expressed dissatisfaction with their hourly wage. Both
complained that they felt underpaid relative to the large amount of sales revenue each generates for
1. What factors should Perkins and Balkin consider when setting the wage for the purchasing agent
position? What resources are available for them to consult when establishing this wage?
2. Suggest advantages and disadvantages of a pay- for-performance policy for Performance Sports.
3. Suggest a new payment plan for the customer service representatives.
Case Study 2: An In-N-Out Pay Strategy: Costa Vida’s Decision
to Boost Pay
For many businesses in today’s belt-tightening economy, decisions on pay need to be strategic to ensure
that employees are treated fairly and to ensure that businesses can remain viable. This requires knowing
what your competitors pay their employees and knowing your own salary budget. But knowing what
your competitors are paying can be both valuable and painful.
As a primary stakeholder and former CEO of Costa Vida, a fast-growing chain of fresh Mexican
restaurants, Nathan Gardner knew he was competing against some restaurant chains with competitive
compensation systems. Costa Vida is a fresh Mexican grill featuring Baja-inspired foods that are made
from scratch daily. Following a trip to Cabo San Lucas on the Baja Coast in Mexico, Costa Vida founders
JD and Sarah Gardner were inspired with a vision: Bring the freshly made local cuisine with the vibrant
lifestyle to the United States. They started their first restaurant in 2001, and after just 13 years, Costa
Vida has more than 50 franchises in Arizona, California, Colorado, Idaho, New Mexico, Missouri,
Oklahoma, Texas, Washington, Utah, and as of 2013 two stores in Canada. One of the main challenges
Costa Vida faces is the fierce competition for customers as well as employees. “You’d be surprised how
much of a difference having good employees in all areas of the business makes,” commented Nathan.
“For the fast-casual food industry,” remarked Nathan, “you are dependent upon your people. If you
don’t treat your people well, they won’t treat your customers well. If your customers aren’t treated
well, you have no business.” For months, Nathan agonized over how he could develop a competitive
compensation plan that matched the objectives of the organization, but that fell in line with the tight
budget of each in- dividually owned franchise unit. He stated, “We, of course, leave the final
compensation decision to the franchise owner, but we do all we can to educate and persuade our
franchisees to be competitive and fair. In the long run, this is how they can maintain a superior level of
Nathan pointed out that a strong benchmark for them has been In-N-Out Burger. In-N-Out started in
California and is known for its great compensation package. They start out all their new “associates”
(aka employees) at a minimum of $10 an hour. They also offer flexible schedules to accommodate
school and other activities, paid vacation, free meals, and a 401k retirement plan. For full-time
associates they provide medical, dental, vision, life, and travel insurance coverage. Their reason for
paying so high is based on a strategy that lower turnover and more committed workers will lead to
better service. “What In-N-Out does for their employees is truly amazing,” commented Nathan. “We
often see employees moving from one fast-food chain to another, but we rarely see employees coming
Nathan had a tough challenge ahead in trying to convince his franchise owners and managers to think
more strategically about their pay systems. He needed to help them realize that paying wages and
offering other compensation benefits that were better than their competitors may mean lower profit
margins up front, but that the returns would be greater in the long run. He also needed to offer
evidence to show that this was not just about being fair, but it was about being strategic. The restaurant
business is a fast and fierce industry and companies come and go all the time. What was it going to take
for Costa Vida to stay for the long haul?
1. Why is it important for pay to be externally fair?
2. Why is it important for pay to be internally fair?
3. What should Costa Vida’s compensation strategy look like? Hint: What are the company objectives
and how can employee pay help to achieve those objectives?
4. What should the pay structure look like? What pay mix would you recommend?
5. How should Nathan communicate a new compensation strategy to his franchisee owners and
6. What effect will paying higher wages have on Costa Vida in the short term? What effect will it have in
the long term? Explain.
Chapter 10: Pay-for-Performance: Incentive Rewards
Case Study 1: United States Auto Industry Back on Top … of
During the financial crisis, many executives’ pay was stifled, reduced, or even withheld. Among the
hardest hit was the U.S. auto industry. Shareholder groups, union leaders, political officials, and the
general public all demanded change in the way auto industry executives were getting rich while their
cars were get- ting poor. For example, Ford made some major cuts for its executives and its employees.
This is why people were shocked to find out that for 2011 the CEO of Ford, Alan Mulally, was to receive
$56.5 million in stock awards. Even today, it is one of the richest pay packages ever given to a top
executive in the auto industry—and it is even after all the clamor over sky-high executive paychecks. Is it
That depends on who you ask. For most, it seems unreasonable that a boss would make more than
1,000 times the pay of the average worker. However, if you ask Ford workers who have seen Mulally
steer Ford back from the edge of bankruptcy, they probably would not complain too much. If you asked
Ford’s shareholders, it would be hard for them to overlook the fact that Ford shares have gone from
$1.56 when Mulally first took over to $14 a share. If you ask Ford dealers, they may be too busy selling
one of the strongest lineups of cars around to answer.
Of course, no one really knows if Ford would have been sitting in such a good position regardless of
Mulally. On the other hand, there are plenty of companies that would be willing to pay $50 million if
they knew their company would rebound as Ford has under Mulally.
1. Are CEOs and key corporate executives worth the large pay packages they receive? Explain.
2. Do you agree with Peter Drucker that corporate executives should receive compensation pack- ages
no larger than a certain percentage of the pay of hourly workers? Explain.
3. Will the Dodd–Frank Wall Street Reform and Consumer Protection Act giving shareholders the right to
vote on executive pay influence the size of these packages in the future? Explain.
Case Study 2: Team-Based Incentives: Not Your Usual Office
Done-Deal Paper Inc. operates throughout central Pennsylvania with offices in Scranton, Harrisburg, and
Altoona. Providing paper and paper needs to most of Central Pennsylvania, Done-Deal is one of the top
two competitors in the area.
In January 2014, Conner Carell, office manager of one of the branch offices for Done-Deal somehow
convinced company president and CEO Bailey Zucker that they needed to change the way their sales
representatives were incentivized. He argued, “putting our sales reps into teams will not only increase
cooperation, but it will increase sales … right now there are too many sales being lost that could have
been won through a team effort.” Most of the time, sales made to clients required multiple interactions
by multiple reps anyway. Bailey agreed with Conner and pointed out that teamwork can also improve
morale and synergy. Based on these assessments, Conner organized his twenty sales reps into four
teams of five reps. Sales teams would pool their commissions regard- less of who initiated and worked
on the sale. After the first year of this team-based incentive program, sales commissions across the four
groups varied dramatically. For instance, the highest paid employees in a team made, on average,
$50,000 more than the lowest paid team members.
During August 2012, Conner sent to all 20 sales reps a survey requesting feedback on the satisfaction
with teams and, specifically, the team-based incentive rewards program. While survey results were
generally positive, not everyone was happy in the office. Problems could be grouped into the following
1. Some sales representatives believed that various team members did not “buy into” the team concept
and were simply “free riding”—benefiting from the efforts of higher performing reps.
2. There was a general feeling that some teams were assigned difficult regions that prevented them
from achieving higher sales.
3. Teams did not always display the motivation and synergy expected, since “bickering” was prevalent
between stars and their lesser performing peers. Average performers complained that star reps made
them look bad.
4. At least a third of the sales staff felt the incentive rewards program was unfair and asked for a return
to individual sales incentives.
1. Do results from the survey illustrate typical com- plaints about teams and specifically about team
incentive rewards? Explain.
2. If appropriate, what changes would you recommend to improve the incentive reward program? Be
3. Would management have benefited from employee involvement in the initial design and
implementation of the program? Explain.