A New Compensation Program to Motivate Performance

Marilyn Brown started her chain of 10 wedding boutiques approximately five years ago. She presently operates within southwestern Ontario and has been enjoying record profits. Marilyn’s wedding boutiques provide full-service amenities to future brides, including wedding planning services, custom fittings, and locating hard-to-find wedding dresses.

Marilyn’s customer service philosophy is that customers are number one and must be satisfied with their purchases. However, recently, there has been a rise in complaints regarding the lack of friendly service being provided, and three long-standing employees have threatened to leave unless their compensation is adjusted in response to servicing Marilyn’s very demanding clients. Currently, Marilyn pays all of her staff the same base salary of $14 per hour without any benefits. Marilyn feels that this approach promotes equity and eliminates any perceptions of favouritism between employees regarding compensation.

Since receiving the negative complaints and the threats of some of her staff leaving, Marilyn has decided she needs to rethink her compensation philosophy and needs your help.

QUESTIONS

I What are the specific problems with Marilyn’s current compensation program?

II Discuss the types of compensation programs and plans available to Marilyn to motivate and retain her existing staff.

III Should Marilyn use only one type of compensation plan, or a combination plan for her employees? Discuss your recommendation in detail.