Vetements Ltee is a chain of men’s retail clothing stores located throughout the province of Quebec, Canada. Two years ago, the company introduced new incentive systems for both store managers and sales employees. Store managers receive a salary with annual merit increasing based on sales above targeted goals, store appearance, store inventory management, customer complaints, and several other performance measures. Some of this information (e.g., store appearance) is gathered during visits by senior management, while other information is based on company records (e.g., sales volume).
Sales employees are paid a fixed salary plus a commission based on the percentage of sales credited to that employee over the pay period. The commission represents about 30 per cent of a typical paycheck and is intended to encourage employees to actively serve customers and to increase sales volume. Because returned merchandise is discounted from commission, sales staff are discouraged from selling products that customers do not really want.
Soon after the new incentive systems were introduced, senior management began to receive complaints from store managers regarding the performance of their sales staff. They observed that sales employees tended to stand near the store entrance waiting for customers and would occasionally argue over “ownership” of the customer. Managers were concerned that this aggression behavior intimidated some customers. It also tented to leave some parts of the store unattended by staff. Many managers were also concerned about inventory duties. Previously, sales staff would share responsibility for restocking inventory and completing inventory reorders forms. Under the new compensation system, however, few employees were willing to do these essential tasks. On several occasions, stores experienced stock shortages because merchandise was not stocked or reorder forms were not completed in a timely manner. Potential sales...
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