“Visionary Design Systems: Are Incentives Enough?” HBS #9-495-011.
1. What is the basic philosophy and values of VDS?
VDS has more than a few philosophy and values of thought that everyone is a partner and people should earn according to what they produced, and that empowerment that makes people knowledgeable and involved in decisions. Also it encourages atmosphere of friendliness and respect as well as cooperative spirit.
2. How would you characterize the VDS compensation (base, bonus, and stock) system? On what principles is it based?
VDS has compensation guides that are based on philosophy that pay is to be in line with output rather than position or seniority. Thus, everyone within a job type earned almost the same base salary. Consequently, compensations such as commissions and bonus would vary fairly. Commissions which account for 50% and 30% of their income for sales representatives and application engineers each are paid on the basis of output. When it comes to stock options, management team believed that it was an effective motivator, but it seems like that most of employees may not fully understand their stock shares and meaning of stock options.
3. Why has VDS had problems with its Product Data Management effort? To what extent do you see incentive issues as important? What other issues are important?
VDS management team has been disappointed by seeing performance of its PDM because management people have not seen a progress even though they have tried to make changes and improve the company. In addition, the empowerment and incentive did not seem to be working. However, the primary source of problems with PDM is that VDS wanted it to produce profit under the under-resourced situation.
Most of the VDS employees and customers poorly understand the PDM market. PDM need to spend time to create an infrastructure and customer base. The managers assume that the current option-intensive compensation plan will be an effective...
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