BASED ON THE ABOVE CASE STUDY, ANSWER THE FOLLOWING QUESTION. ELABORATE AND GIVE EXAMPLE FOR YOUR ANSWER.

1. Discuss the key factors that Haven Food Sdn. Bhd. needs to consider in designing a sales compensation plan. (15 marks)
2. Discuss how HRA Department can effectively communicate the new changes of the incentive plans and benefits packages to the employees. (10 marks)
3. What tests can the Haven Food Sdn. Bhd. do in order to assess if the changes made to the compensation management strategy will provide it with competitive advantage? (10 marks)

Document1 - Word (Product Activation Failed) S MAILINGS REVIEW VIEW 21T . 1 No Spac... Heading 1 Heading 2 11 Normal Title Subtitle Subtle Paragraph Styles Haven Foods Sdn. Bhd. is a food ingredient manufacturer and has decided to change its long-held business strategy from emphasizing profitability to focusing more on increasing market share. The company believes that it can increase market growth by diversifying its product line and venturing into new markets. This strategy will eventually lead to profitability when it achieved economies of scale. The company knew that to drive market growth, it has to change its incentive plan. The current incentive plan is a group-based incentive plan. Each product line is assigned to a group of sales persons and they will receive a percentage of their territory's gross margin. At the end of the year, the rewards are then shared by each individual in the group. Due to this strategy, most sales groups sold mature product lines that had the highest gross margins. The manufacturer quickly realised that although the incentive plan maximize profitability, it was not helping the company gain market share with its new product offerings. Clearly, the incentive plan has to change to support the new strategy. On top of that, the company also needs to understand its sales force better. Some of the top management are suggesting that Human Resource and Administration (HRA) Department hire a new batch of sales persons that are a better fit with the new strategy. The Sales Manager proposed for the company to revise its incentive plan and based the incentives on units sold rather than gross margins. He wants the incentive plan to be individual-based rather than group-based. He argues that previously the company used individual-based incentive plan and was more successful with it in comparison to the current plan. He added that the current group-based incentive plan creates free-rider problems and is more difficult measure because the sales performance is actually individual based. Moreover, he suggests that the products be divided into three categories: Develop, Maintain, and Harvest. Develop products had the highest per-unit incentive, while the Maintain and Harvest categories had a lower and lowest per-unit incentive, respectively. With this new incentive plan in place, top management hopes that the strategic direction and performance expectations are communicated clearly to the sales persons. 1 No Spac.. Heading 1 Heading 2 JE 11 Normal Title Subtitle Subtle Paragraph Styles In order for the new incentive plan to be successful, rewards need to be made substantial enough to drive change. The Sales Manager proposed that the company sets its annual target awards at 25% of base pay for achieving goal; however, the award could increase to as much as 40% of base pay for superior performance. This was a significant increase over the old plan which had a maximum award of 30% of base pay. Incentives will be paid quarterly or semi-annually, so that the sales force would almost immediately see the connection between their efforts and their rewards. The Sales Manager suggests the company to also focus its more seasoned sales people on Develop products, while assigning the less experienced sales people to the Maintain and Harvest products. This approach is hoped to free the more experienced sales people to devote more time to the new products, and provided a better training opportunity to less experienced personnel. Although the Maintain and Harvest products had lower per-unit incentives, the products were easier to sell in an already established marketplace. The top management accepts the proposal by the Sales Manager and requires HRA Department to look into the idea. They also require HRA Department to train the sales persons to sell its new products and to recognize the characteristics of the customers most likely to buy them. Through the training program, top management hopes to communicate to the sales force the new products potential and convinced them of the probability of success. On top of the changes to the incentive plan, the Finance Manager reported that the employees' insurance premiums that are part of benefits package are steadily increasing. Currently, the benefit packages are covered fully by the company. If it keeps increasing, the Finance Manager forecasted that in a few years' time the company would not be able pay for the benefits package. As such, the top management requests that HR Department to look into ways of cost containment and to streamline the communication of the new changes to all its employees in order to minimize confusion and rejection