1 & 2) What are the different incentive compensation plan options covered in the case and what problems does each plan solve?
Mr. Duckworth believed in the power of incentive to guide management action. In order to better align the interest of the management with the shareholders, Mr. Duckworth implemented a variety of new incentive compensation programs:
The first incentive program implemented addressed tardiness and attendance. Basically, under this plan an attendance bonus ($0.60/hour) would be awarded to any plant-level employee who was never more than two minutes tardy for work each pay-period.
To ensure that quality became part of Duckworth Industries culture, a quality incentive program was implemented. Under this incentive program plant level employees and shift supervisors could earn up to an additional $100/month for meeting promised shipment dates and reducing the number of customer complaints. This quality incentive plan also helped foster an environment of teamwork between plant employees and their respective shift supervisors.
The next incentive plan implemented was a profit sharing plan (open to all employees). Mr. Duckworth knew that a profit-sharing plan would help bring groups of employees to work together toward a common goal (the success/benefit of the company). As part of this incentive plan a profit sharing pool was created which was equal to 15% of profits. At the end of the year the pool was then divided up given to employees pro-rata, based upon their individual wages. While some believe that a disadvantage of a profit sharing plan is that it focuses only on the goal of profitability, which may be at the expense of quality, Mr. Duckworth?s previous incentive plan had already addressed this issue (Compensation, 1999).
As an additional incentive, individual incentive programs were offered to
References: Compensation: Incentive Plans: Profit Sharing. HR Guide of the web. Retrieved January 20, 2006 from http://www.hr-guide.com/data/G444.htm Stewart, B. (2005). What is EVA? Retrieved January 20, 2006, from http://www.sternstewart.com/evaabout/whatis.php University of Phoenix e-Reource. Duckworth Industries, Inc. https://mycampus.phoenix.edu/secure/resource/resource/asp