1. Recommend to the president that a meeting be arranged with the sales representatives entitled to a bonus and tell them that their checks are going to be delayed until Puget’s financial picture clarifies. The sales reps would be told that the company has a legal right to delay payment and that it may not be able to pay the bonuses if its financial situation continues to deteriorate.
2. Recommend a meeting with the sales representatives entitled to a bonus and tell them the company’s deteriorating financial situation triggers one of the contingency clauses in their contract so that the company won’t be issuing their bonus checks. Puget will just have to deal with the negative impact on sales rep motivation.
3. Recommend strongly to the president that Puget pay the bonuses as promised. The legal contracts and financial situation don’t matter. Be prepared to resign if the bonuses are not paid as you promised. Your word and a motivated sales team mean everything to you.

Federico Garcia, vice president of sales for Tacoma, Washington-based Puget Sound Building Materials, wasn’t all that surprised by what company president Michael Otto and CFO James Wilson had to say during their meeting that morning.
Last year, launching a major expansion made sense to everyone at Puget, a well-established company that provided building materials as well as manufacturing and installation services to residential builders in the Washington and Oregon markets. Puget looked at the record new housing starts and decided it was time to move into the California and Arizona markets, especially concentrating on San Diego and Phoenix, two of the hottest housing markets in the country. Federico carefully hired promising new sales representatives and offered them hefty bonuses if they reached the goals set for the new territory over the next 12 months. All of the representatives had performed well, and three of them had exceeded Puget’s goal—and then some. The incentive system he’d put in place had worked well. The sales reps were expecting handsome bonuses for their hard work.