Section A - Case Study (50%) V & B is an industry leader in the development and manufacture of a wide range of personal care products. The company is serving a diverse group of customers that include hotel chains, retail stores, supermarkets, etc. It has been holding over 20% market share and earning considerable profit margins. V&B's success, in addition to its excellent service, can be attributed to the good teamwork among the salespeople and workers. All employees have been receiving a stable monthly income and an annual across-the-board salary increase, which is usually above the market rate. However, challenges hit the company two years ago. Keen competitors emerged and V&B's market share was gradually eroded by competitors' aggressive marketing efforts. The top management of V & B held a meeting for exploring ways to cope with the market challenge. Samuel, the Marketing Director, suggested that V & B should put more effort into customer service, fast delivery and good product quality, which was unanimously agreed as the key to success. Samuel further proposed to hire an experienced marketing manager for launching a series of marketing campaigns aiming at regaining the market share. Yet, he was not sure how much to pay to this new hire. He then asked Jenny, the Human Resources Manager, for advice. Jenny replied, "There are certainly some factors to consider, especially when the competition for good people is so intense nowadays." On the other hand, in order to set aside resources for the marketing campaigns, the top management decided to cut the compensation budget. David, the Managing Director said, "In today's highly competitive business environment, low compensation budget is a fact of business life. In addition, to maximize each compensation dollar, we should link an employee's pay level to the contributions he or she makes to organizational success. For example, we can cut the basic salary for salespeople and pay them individual commission instead. What do you think, Jenny?" Jenny responded, "I understand the importance of saving up resources for the marketing efforts but low compensation budgets, coupled with the pay-for-performance compensation policy, can have significant impact on employees. Sometimes, results can turn out to be undesirable. It is also essential to identify key performance areas correctly. We need to analyze the pros and cons of this new compensation strategy." She continued, "Performance appraisal plays a crucial role if this new policy is to be implemented and it may bring changes in the way by which employees are being appraised. In order to distinguish high performers from low performers, we can consider using the forced distribution method to replace our existing practice of graphic rating scales." David then asked Jenny to prepare a report on these issues. (Adapted from Bohlander and Smell (2013). Principles of He Rource Management (16th edition) China South Western (a) Identify four key factors that V & B should consider when setting the compensation level for the new marketing manager. (8 marks) (b) Explain three arguments to support the implementation of the pay-for-performance compensation policy. (12 marks) (c) From the perspective of human resources management, discuss three possible negative impacts on V & B if the policy of annual across-the-board salary increase is replaced by the pay-for-performance policy. (12 marks) (d) In order to assess employees' performance for facilitating the implementation of the new compensation policy at V & B, propose three key performance areas and one performance indicator for each area. (9 marks) (e) Suggest three problems that may arise if the current practice of graphic rating scale is replaced by the forced distribution method. (9 marks)