Vetements Ltee

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Are incentive programs good for a company or bad for morale? This all depends on whether the rewards support corporate goals. These incentive programs could enhance the goals and increase profits and customer loyalty, or the incentive programs might create competitiveness and back-stabbing among employees, and that is not best way to run a company. Vetements Ltee encountered competitiveness and back-stabbing among employees when it introduced its new incentives program. Vêtements Ltée is a chain of men's retail clothing stores located throughout Quebec, Canada. In 1993 the company introduced a new incentive system for store managers and sales employees. Each store manager would receive a salary along with an annual merit that would increase if store sales exceeded the targeted goal regarding store appearance, store inventory management, customer complaints, and other performance measures. Sales employees were paid a fixed salary plus a commission based on their percentage of sales. Commission was about 30% of their pay. Senior management believed that this new incentive system would improve service and sales volume. However, it did not. Soon after the program was brought into effect, senior management began to receive complaints from the store managers regarding the performance of sales staff. Sales staff would stand by the door and "tag" customers as theirs when the customer would enter the store. Staff began to argue over customers, became overly aggressive thereby intimidating customers. While they argued, parts of the store were left unattended. Inventory and reordering tasks were left neglected. When 30% of an employee's paycheck is based on commission, employees want to spend their time selling and not stocking.

In an attempt to rectify these problems, Vêtements Ltée attempted a few solutions. They assigned people to do the inventory and stocking. This caused bitterness and resentment. Then managers asserted their power by threatening staff with dismissal if they did not stock the shelves. This was successful when managers were in the store, but when they left, employees snuck back onto the floor. Management also assigned employees to certain areas in the store, but then employees complained about being assigned to slow areas. These actions broke down the trust between the managers and employees and hurt staff morale.

Vêtements Ltée needs to realize that some employees, but not all, are motivated by rewards and bonuses. When employees are motivated and excited about their jobs or because they are doing something that provides a service to others, they are much more productive and satisfied with their careers. Vêtements Ltée needs to find a happy medium which uses both economic and social incentives. It needs to abandon its new commissions program and switch to a profit sharing program. There are a few easy solutions that Vêtements Ltée could attempt: Option 1 – Keep commission incentive

Hire employees at a specific wage who are in charge of stocking shelves and keeping inventory Rotate employees throughout the store so that no one is in a specific location for an extended period of time Option 2 – get rid of commission incentives

Hire employees at a specific wage who are in charge of stocking shelves and keeping inventory, or rotate each employee through the stocking position. Each employee will fill in a stocking log that specifies everything that they did during their shift. Have a base pay for all employees, and split the merit that is above the target sales with all employees and not just the manager

Give a bonus to the branch of Vêtements Ltée that has the greatest increase in sales compared to their previous year. Option 3 -- Fire all employees and hire all new employees (very impractical)

I would recommend the second option. However, Vêtements Ltée is also going to need to make some additional changes.

I agree with management theorist Frederick Herzberg. He said,...
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