Management Consultancy case study
Burgess is the CEO and different departments are under him. The business coordinators department, the sales and marketing department, revue services department, management services department, information system department and recruiting department are all reporting to Burgess. Compensation Plan International Profit Associates uses the commission based compensation which means that income earned for an Individual Is primarily based on his performance.
Performance defers for each position, PC’s are using the point system In determining the commission earned.
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Off’s are paid on the basis of surveys sold whether It Is a normal sale or a hybrid sale, the amount differs for each. The analysts are paid based n number of surveys converted to consulting and the number of hours attributed to the consulting sold. Lastly, the consultants are paid on the basis of commission on a percentage of the total billing. Corporate Culture The culture of PIP Is embedded with Intense pressure, everyone Is participating In the “PIP game” this game is all about numbers. It shows therefore, that quantity matters significantly in their operations.
Do nothing PROS CONS No additional costs will be incurred Operation will continue without any interference Integrity of the company will be Jeopardized Increase in complaints Possible lawsuits in the future 2. Change the compensation policies for Survey Services Department. Mixture of fixed Salary and Commission based on consultancy services sold. Tendency to fraudulently increase sales for more commission will reduce Lesser pressure from supervisors since their salaries will also be somewhat fixed Pressure from supervisor is still present although reduced Tendency to increase sales for higher commission is still present 3.
Change the compensation policies for Survey Services Department. Fixed rate per hour of work. Tendency to fraudulently increase sales for more commission will most probably be eliminated also be fixed Complains will most probably be reduced Analyst will lose their zeal in selling consulting services Sales of the company will reduce Conclusion From the given alternatives, I have chosen alternative number three which is to change the compensation policies for Survey Services Department to a fixed rate per Hour of work.
The alternative, in my opinion, meets all the objectives. By establishing a fixed salary for the supervisors as well, they will no longer pressure the analysts to sell consultancy services compared to before where there compensation was based on commission.
Since the analysts’ compensation will also be fixed, they will no longer be induced to increase sales in order to increase commission, thus, since factors which are pressure and self-interest are eliminated, the analyst will analyze the clients’ business depending on the actual circumstances and without bias.
Also, in my opinion, the analysts’ zeal for converting a survey into a consulting project must be eliminated since this causes bias; analysts must be neutral in approaching the client. He must decide whether to offer consulting services depending on the actual circumstances in the clients business. Potential Problem Analysis Although pressure and self interest due to commission based compensation will be eliminated, pressure will still be present from top management due to the decrease of consulting service sales.
This will affect the analysts approach to the client and might still cause in making fictitious problems in order to increase the chances of consulting service sale.
Moreover, since sales will reduce, fixed compensation that will be given might be little and might cause some analysts to leave the company; compensation on other departments might be affected as well.