A New Compensation Program to Motivate Performance

Jane Smith started her new business chain of $20$ hat stores approximately five years ago. She presently operates in Ontario and has been able to capture a large amount of the market due to her unique hats and very few competitors. Due to this, Jane has seen great profits since the start of her business venture. Jane$$s hat stores provide service to the community by having a vast variety of hats and offer customers the chance to order custom made hats as well as one$-$of$-$a$-$kind orders for hard$-$to$-$find items. Jane offers a unique shopping experience unlike her competitors, allowing her to remain profitable and successful.

Jane's customer service philosophy is that customers are number one and must be satisfied with their purchases. However, recently there has been a rise in complaints regarding the lack of friendly service being provided, and seven long$-$standing employees have threatened to leave unless their compensation is adjusted in response to servicing Jane's very demanding clients. Currently, Jane pays all her staff the same base salary of $$15\mathrm{.}50$ per hour, regardless of how long the person has been with the company. Jane also does not offer any benefits. Jane feels that this approach promotes equity and eliminates any perceptions of favouritism between employees regarding compensation.

Since receiving the negative complaints and the threats, some of her staff are choosing to leave the company stating that they are not receiving enough pay or incentives to remain with the company. Because of this, Jane has decided she needs to rethink her compensation philosophy and needs your help.

Questions to Answer:

$1.$ Identify the problems with Jane's current compensation program and the impact they are having on her business. How would you improve her compensation strategy?

$2.$ Which of the $3$ compensation strategies $($Lead$,$ Lag or Match$)$ would you suggest Jane adopt? Provide your reasoning for why you selected this strategy.

$3.$ What type of benefits or incentives would you suggest to Jane to incorporate into her business? Explain why you chose the incentives$/$benefits you discuss $($You may suggest more than one incentive, if appropriate$).$ You can explore overall incentives or look at benefits that would entice employees to stay with the company.

$4.$ How often do you believe Jane should re$-$evaluate the beenfits and compensation she offers to her employees? Why did you select this timeframe?