Case Analysis of “The Best Laid Incentive Plans”
Dr. Faye Sisk
August 1, 2014
The Best Laid Incentive Plan is a case analysis depicting organizational behavior and performance appraisal management. Rainbarrel Products is a loosely ran consumer durables manufacturer. Within the last ten years, Rainbarrel Products has shown difficulties rebounding from a sluggish economy. The CEO, Keith Randall, once described as “aspiring” and “innovative”, has allowed the company to fall victim to a downward economy due to the recent lax in leadership. In addition, Rainbarrel is not adjusting to the decrease in consumer spending in comparison to their competitors; however, this is the least of the company’s problems. In efforts to save Rainbarrel from continuous distress, Randall hires Hiram Phillips as the Chief Financial Officer (CFO) and Chief Administrative Officer (CAO). Hiram generates changes in the company which yields great numerical results. Hiram’s strategy includes cost cutting the budget, reduction in staff as evidenced by cost reduction in labor, restructured sales incentives, changes in customer service procedures, and changes in the shipping process. Phillips is very proud of his success and is eager for the Corporate Executive Council (CEC) to hear his progress. Sally Hamilton and Frank Ormondy, consultants with Felding & Company are solicited by Phillips to perform baseline metrics to be tracked and monitored in a year’s timeframe. The consultant’s findings are revealed and everything seems to lean in Hiram’s favor; however, after the meeting, the tide turns. Randall approaches Phillips regarding unsolicited information from other members of the council pertaining to the metrics Hiram has in place. Phillip makes overwhelming changes to the current organization’s systems, procedures, and processes resulting in negative feedback from Rainbarrels employees and customers. Even though the consultant’s reports give Phillips glowing results, Hiram is unaware of the damage he is causing at Rainbarrel. Problem Statement:
The main problem identified in the case is the flaws in the performance management systems. Rainbarrel needs to make a dramatic change to its performance management system. The system is one-sided and not aligned with the company’s performance culture and strategic objectives. According to Kastalli, Neely, and Van Looy, (2013), “increasingly, manufacturing firms are turning to services as a new way of creating and capturing value. Despite its potential benefits, many new product-service providers struggle to deploy service activities effectively, not least because they fail to reflect the presence of service activities in their performance management systems” (p. 100). The CEO has lost sight of other key components of the company which is impacting Rainbarrel from being a successful enterprise. This fact alone questions whether or not the current leadership should be at the helm of Rainbarrel Products. Assumptions:
Kerr states (2003) “the metrics program of Hiram focuses on the intermediary steps and assumes that such enhancements will make a positive impact on the bottom line” (p.31). The assumptions that highlight the main issues include the following: Hiram Phillips knew how to work within Rainbarrel’s budget. The employees are motivated by monetary means.
Rainbarrel’s shipping process and customer service department are the only factors which stymies productivity. Email is the preferred vehicle of communication at Rainbarrel. Performance management is not required to align with the performance appraisal and incentive plans at Rainbarrel Hiram assumes the “fat and happy” company will be”lean and mean” within a year. Positive results are masked by dissatisfied customers, unhappy employees, and decreased...
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