For this assignment, you are required to complete Individual Problems 17‐2 and 17‐6 at the end of Chapter 17 in Managerial Economics: A Problem Solving Approach. In addition, you are required to compl
CLC INCENTIVE PLAN 0
CLC Incentive Plan
The Rockets
Grand Canyon University
ECN - 601-501
March 25, 2020
The banking industry employs about 1.8 million workers and is expected to grow eight percent over the next projection period, compared to eleven percent for all other industries ("Banking industry," n.d.). A robust incentive plan to attract, motivate and retain high-quality associates is essential. The banking company used in this paper offers competitive pay, benefits packages, tuition reimbursement and professional development opportunities (Hancock Whitney, 2020). The firm’s rewards package is based upon a “pay for performance” philosophy with incentive plans that link rewards directly with the achievement of individual, team and corporate goals.
The firm recognizes the direct link between associate performance and the company’s success. Their core objectives are to attract, motivate and retain high-quality associates, encourage positive behavior, mitigate financial and statutory risk, align segment performance with the company’s overall financial results and enhance shareholder value. Offering an incentive plan that links pay to performance measurements (Froeb, McCann, Shor, & Ward, 2016, p. 47). By design, the company’s incentive plan provides an annual reward of up to seven percent of an associate’s annual base salary when target performance is reached. The performance is measured quarterly by a plan administrator.
Since the firm believes that its success is closely linked with associate performance, one of the metrics utilized to measure the firm’s performance towards their target is the measure of associate production in their job function (Hancock Whitney, 2020). Measurement of associate production includes establishing a baseline for the minimum amount an associate can produce then setting target goals for the associate to hit and exceed the minimum amount (Mitrefinch Inc., 2016). For this firm one metric that can be measured is the amount of new financial accounts that are set up for each associate (Hancock Whitney, 2020). This metric not only impacts the associate’s production but also helps with the company’s overall financial results. To reach its goals, the company must provide a high level of motivation.
Motivating employees is not as simple as throwing more money at them. This method is one of many that the firm will incorporate in order to motivate personnel and increase company output. With management focusing on a goal-oriented incentive program built on trust through continual communication and training. Highly motivated employees will work harder, be happier and be more inclined to stay with the company.
The motivation of the employees starts with management. Managers will be required to meet with all members of their staff during January to set yearly goals. The goals must be clear, concise and obtainable for the calendar year. Communication with the employee builds trust, which in turn acts as a motivator (Paden, 2019).
Regular consultations between the manager and employee will occur throughout the year with the frequency of these meetings being determined to align with the progress of the goals and the amount of support needed. Providing positive feedback and constructive critiques for areas of improvement will allow team members to grow professionally and continue to foster a positive collaborative work environment (Skilbeck, 2019). According to Skilbeck (2019), employees must be allowed to work-out problems independently in some cases. Empowering staff members lets them know that their skills and perspectives are valued (Root, 2019). Additional training and resources will be provided to all team members to ensure their goals can be met.
According to Paden (2019), when businesses provide additional training to team members, it boosts their confidence and they are more likely to be motivated to complete their goals. The additional training improves the workers' knowledge base and can aid in future career advancement opportunities. Employees will be made aware of this additional training as it becomes available. The target goal of two to three educating sessions per year, per operative, will be the responsibility of the manager. As employees advance through milestones and training, awards will be given in different forms.
Frederick Herzberg’s two-factor theory (as cited in Kokemuller, 2019), notes that recognizing employees for a job well done often raises their self-esteem and has a higher motivational effect than income rewards. As milestones are reached the team member will be recognized by the manger through office e-mail as well as public acknowledgment. Celebratory events can also be utilized at the discretion of the manager. If certain milestones are significant enough a monetary reward will be issued in the form of a gift card, as are cash bonuses. Additional pay increases and bonuses will be awarded after the employee has completed his/her goals. All bonuses and raises will be issued to the employee after the first of the year, during the employee review period. During the employee review period, between January and February, the manager will evaluate the team member’s performance from the prior year and apply the earned incentives. These incentives should help reduce employee turnover and help our company remain competitive within the banking industry.
A case can be made for why incentives are not sustainable in the long run. The premise of this argument is that workers will transform back into their old ways when these promotional tactics run out. People don’t just get rid of their tendencies when motivated by rewards however, they might suppress these unproductive tendencies for the duration of these additional benefits. The singular obstacle that prevents workers from maintaining a high productivity level even without additional rewards is human behaviorism.
However, with incentive plans that support their strategic objectives, help the industry to attain their long-term goals, provide desired returns and behaviors, and yield real results, establishments can move out of reactive mode and take a proactive approach to achieve success. As the rivalry for limited labor and talent intensifies in the years ahead, having a well thought out incentive plan will likely become a key differentiator in an establishment’s performance and overall value to potential candidates. An incentive program helps companies develop employees who excel at maximum levels. Along with providing all employees a way to continue to develop and improve performance. This enhances employee engagement and helps with overall employee satisfaction.
Each company that offers incentive compensation has a unique plan to address its needs; there is no single best way to effectively intensify the workforce. Therefore, due to the importance of retaining workers, firms should also utilize a non-discretionary approach like structured incentives. This approach is beneficial for both parties. A happy and motivated employee positively affects productivity.
The firm used offers an average salary to its employees along with a great incentive package. When worker and firm incentives are not aligned, and worker effort is imperfectly observed, and workers may exert inefficiently low effort (Jackson,2014). This is known as moral hazard. The firm offers incentives to encourage the employees to obtain or exceed the goals given. This compensation style provides salespeople with incentives to work hard because they bear the burden of slacking in the form of lower paychecks (Depersio,2018). By working hard to earn the incentive the employee is growing in knowledge and experience. The firm benefits as well with a higher sales volume.
Moral hazard is also used to discourage outside employment. The firm does allow employees to have outside employment but it is not often approved by the human resource department. HR may strongly enforce non-competition guidelines and require that all second jobs be approved by the human resource department before acceptance. This policy is enforced so that competitors are not given in house information by someone who works for a competitor. By developing and implementing a policy in your employee handbook that prohibits your employees from working for competitors can help reduce moral hazards (Lopen,2019). Being a full-service financial institution, one has to be cautious of where employees seek outside employment.
Based on this paper, incentives offered by the firm offer associates an opportunity to display their value to the firm. The motivation based on the pay for performance incentives offered by the firm is multifaceted. This compensation style provides higher compensation for the associate as well as higher productivity as well as higher compensation on their paycheck. A robust and generous incentive plan will ensure employee satisfaction. Moral hazard discouraging outside employment ensures that employees will ensure that current employees will remain with the current company. For these reasons, this firm is shown to have a beneficial incentive plan for the employee and the employer.
References
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