Henson Case

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You have been engaged as a compensation consultant to advise Henson Stores, Inc on the development of the bonus portion of the firm’s compensation plan for store managers. You have developed the following work plan for the engagement. Complete each of the four steps below. 1. The first step in developing the bonus plan is to validate the measures used in Henson’s BSC. Assume that the four BSC measures are 1. customer survey

2. average wait time,
3. district manager review, and
4. employee rewards,
As provided in the table above. Using correlation and regression analysis, conduct a study to validate the balanced scorecard. The objective of the study is to make sure that the scorecard measures being used are in fact the key measures associated with success, where success is measures by earnings. As a criterion for a reliable scorecard measure, use a statistical significance level of p = .05. Indicate the one or more measures that are reliable based on your study. In this case the “Customer Survey” and “Average Wait Time” were deemed reliable based on regression analysis with p values less than 5 percent.

2. The next step is to calculate the amount of bonus for each store manager assuming that the total bonus pool for all store managers is divided into sub-pools, one sub-pool for each of the reliable measures as determined in part 1 above. 1. First, determine the amount of the total compensation pool for the company. Second, determine the amount of the correlation between each BSC measure and earnings. Third, allocate the total pool amount (from the first step above) to the sub-pools so that the amounts in the sub-pools are in proportion to the amount of the correlation measures determined in the second step. 2. For each sub-pool, calculate the amount of the bonus for each store manager assuming that each manager’s score on this measure is used as the basis for allocating the sub-pool bonus. Do this for each sub-pool. 3. Total the sub-pool bonuses for each manager. Which stores have the top three and the lowest ranked managers? Make sure that the total of bonuses for all store managers equals to the total bonus pool. Based on the allocation logic in Part 2 the store with highest allocated bonuses were stores number 1, 21, and 12 with allocated values of $ 244.01, 235.05, and 235.05 respectfully. The lowest allocated stores were number 2, 23, and 18 with allocated values of $ 118.28, 119.08, and 130.58 respectfully. Desc| High Co #| 2) BSC total $|

Highest| 1| 244.01|
2nd Highest| 21| 235.05|
3rd Highest| 12| 235.05|
| | |
Desc| Low Co #| 2) BSC total $|
Lowest| 2| 118.28|
2nd Lowest| 23| 119.08|
3rd Lowest| 18| 130.58|

The entire allocation amounts are following:

Store No.| 2) BSC total $|
1| 244.01 |
2| 118.28 |
3| 180.12 |
4| 202.19 |
5| 137.44 |
6| 183.91 |
7| 206.42 |
8| 147.79 |
9| 183.47 |
10| 201.54 |
11| 181.28 |
12| 235.05 |
13| 205.18 |
14| 217.12 |
15| 171.52 |
16| 166.43 |
17| 223.10 |
18| 130.58 |
19| 196.66 |
20| 202.19 |
21| 235.05 |
22| 174.00 |
23| 119.08 |
24| 193.23 |
25| 205.47 |
26| 152.74 |
27| 162.79 |
28| 188.49 |
29| 232.06 |
30| 172.32 |
TOTALS| 5,569.48 |

1. Which three stores have the highest manager bonuses and which has the lowest? Make sure that the total of bonuses for all store managers equals to the total bonus pool.

Based on the allocation logic in Part 3 the store with highest allocated...
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