Las Ferreterías de México

Topics: Book value, Depreciation, Corporation Pages: 4 (1231 words) Published: October 25, 2010
Las Ferreterías De México Comments

Who Makes the recurring Key Decisions in Las Ferreterias?

Mr. Gonzalez makes some of the global decisions but the store managers make a lot of the recurring key decisions.

Person(s) Responsible
Key Recurring Decisions
for Making the Decision
Order right items in the right quantities
S
Staffing with right numbers of good people
S
Pricing
S
Granting credit
S (with corporate check on large decisions)
Selling
S, R (large contractors only)
Store location and design
C
Advertising
S
Control expenses
S
Key:
S = store
R = region
C = corporate

Old Incentive Plan
Before this new proposal, performance-dependent incentives were not an important part of the Ferreterías management system. Bonuses were small (2–5%) of base salary, and they were based on the company’s overall profits, so they were not controllable to any significant extent by any except the company’s very top managers. Mr. Gonzalez also provided some subjective bonuses for exemplary performance. These weak incentives seem to have caused some employees to become lazy and to be not focused on the aspects of performance important to the company’s success. These problems are indicated in the quote that opens the case. Issues with the New Incentive Plan

1) the plan excludes all employees except the store, regional, and corporate managers. Clearly the lower-level employees create value for the company, but the consulting firm decided to exclude them with the reasoning that Ferreterías could not measure effectively the performances of these individuals. Undoubtedly some things could have been done. For example, sales people could have been rewarded for bringing profits from new sales or for increasing sales from existing customers. Yard workers could have been rewarded for receiving positive customer feedback. 2) Division of the bonus pool. Corporate managers are to be given, on average, 3% (15%/5 people) of the...
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