Holland’s is a small ladies’ clothing store with 14 employees. On any day, eight or nine employees will be scheduled to work. More than 95 percent of Holland’s revenues are from the sale of clothing, and the remainder is from the sale of accessories such as gentle fabric wash, stain remover, padded hangers, and so forth. Employees are informed of the daily sales projection, but individual employees are not given a sales quota. March is Holland’s slowest month. To encourage the salespeople to work harder in March, they are given $0.25 for every accessory item they sell, and the top salesperson gets a $10 bonus for the month.
Required:
(a) Is the $0.25 incentive a good performance reward? Can it be improved? Explain.
(b) Is the $10 bonus a good performance reward? Can it be improved? Explain.