I. Point of View
The point of view of the store manager, Elizabeth Santos is the one being considered in this case. Aside from being the one responsible for designing the store management systems and procedures for all the stores, she was also given the responsibility of managing two of the Hiyas stores. Taking Elizabeth Santos’ viewpoint would be appropriate in this particular case since she has the authority and knowledge regarding the management of the involved stores, and also it was under her management that the bonus incentive system was implemented.
II. Analysis of the Case Situation
The Santos family initially owned and managed a company that offered a line of handmade gold and other jewelry in Quezon City in 1968. As the years go by, the company decided to expand their business by opening four new outlets that were located in different parts of the city. The increase in the number of stores also demanded the expansion of the store staff and division of work among the owners in managing the sales outlets. This expansion was said to have created an array of new problems in the operations and supervision of all the five company outlets that have led them to the decision of closing the original store in Quezon City in 1989.
Elizabeth Santos eventually joined her family in the management of Gintong Hiyas, and was responsible for introducing some innovations such as a system for stock inventory taking and reconciliation, as well as a better bookkeeping and accounting system for each store and firm as a whole. She was also given the responsibility of managing two of the Hiyas stores, wherein she was able to implement a bonus incentive system that would motivate her employees to increase their sales that in return would improve the store profitability. The incentive system was said to have increased the employees’ responsiveness towards their customers which was followed by a significant increase in the store sales. The employees’ morale has also improved remarkably as they exceed their sales quota and earn their bonuses more often.
Though the sales of the stores increased with the first implemented staff incentive system, it resulted in the disturbance of the relationship among the sales people. The problems that were faced by the company can be viewed under the assumptions of Maslow’s Hierarchy of Needs. In this case, we can see that sales personnel have to secure first their physiological needs (in terms of monetary incentives) and they believe that they can achieve this by competing with other employees (in terms of customer and sales) just to meet their own quotas and defer to secure the social level of need.
Sales personnel could have considered their social need by maintaining a positive relationship among their co-workers however following the assumption of the said theory they seem to have prioritized the first level of needs which was in terms of the monetary incentives that were deemed necessary to secure their physiological needs. The social level of need may have been compromised to the extent that there now exist a competition that widens the gap among the employees, and a culture of “client ownership” has been present. Furthermore, Santos fears the effect of this unwanted culture towards customer satisfaction and seeks to prevent it by recreating the motivation strategy to one which enhances both the performance of the employees and their formal relationships with each other.
III. Statement of the Problem
As a manager, one must ensure that both human and non-human resources are utilized efficiently in order to achieve the goal of the company. In using non-human resources, technologies can be developed to increase their efficiency. However, human resources must be viewed differently as each has individual differences, which would mean that they also get motivated differently.
Moreover, as the store manager, Elizabeth Santos must be able to think of ways that would motivate her employees in the way that would benefit not only the employees themselves but also the company as a whole. Essentially, she must be able to know what is the best way to motivate the employees that in a way would help increase the store profitability without sacrificing the working relations among the employees.
The objective of the study is to come up with a motivation system which enhances both the performance of the employees and their formal relationships with each other. This would entail that the chosen alternative will motivate them to be more productive while ensuring a harmonious working relationship among the employees that in effect would maintain the increasing store profitability in the long run.
Specifically, at the end of the analysis, the following objectives must be accomplished: To determine the advantages and disadvantages of the individual and group incentive systems; To device possible alternative incentive systems; and
To identify the most effective incentive system that will keep the employees of the Gintong Hiyas motivated.
V. Formulation and Evaluation of Alternatives
In line with some contemporary motivation theories (particularly the goal setting and reinforcement theory), the group came up with the following alternatives under the assumptions that goals may actually direct behaviour, and individual behaviour particularly their work performance may actually be reinforced through the presence of organizational rewards. In relation to this, it was also assumed (based on the expectancy theory) that employees will exert a high level of effort given that there is a perceived strong relationship between their effort and performance, performance and rewards, and reward and satisfaction of personal goals. Given these assumptions, the group devised some alternatives that were aimed at motivating the employees by giving them a reward or recognition in exchange or based on their work performance. In particular, the following alternatives are considered:
1) The management will continue to implement the Individual Incentive Scheme but with some modifications. The same as the current incentive system, the employees will be rewarded when they were able to achieve their individual sales quota. However, instead of doing it on a daily basis, the incentive was now designed to be implemented on a weekly basis under the assumption that they also receive their wage weekly. Doing so will give them more time to meet their individual sales quota with less pressure on their part as compare to when it was done on a daily basis, Since the scheme will be done weekly, their percentage bonus whenever their individual sales quota is achieved will now just be 5% of their pay for the week.
2) The management will implement a Group Sales Incentive Scheme. The same as the first alternative, it will be done on a weekly basis and the employees will also receive 5% of their pay whenever they were able to meet their sales quota. However, in this particular incentive system, their sales quota will be based on their performance in terms of their sales a group (collectively).
3) The management will introduce and implement a “Double-Quota” Incentive Scheme. In this type of scheme, there will both be an individual and group sales quota that will also be evaluated on a weekly basis, with 5% of their pay as incentive whenever they were able to reach both goals. The objective of the “double-quota” incentive scheme is to set an individual baseline quota first, that each individual should be able to achieve in order to meet their sales quota as a group. Therefore, when a certain employee has been able to meet his/her baseline sales quota, he/she is expected to motivate or encourage his/her other co-workers to also meet their individual sales quota so that as a group they will be able to meet the sales quota that was given to them. Only then will they be able to obtain the bonus incentive for their group as a whole. 4) There will be no incentives based on their sales; however the employees were expected to be motivated by offering them other benefits (SSS). This particular alternative focuses on motivating factors other than monetary rewards, such as the security of having a stable job with secured benefits.
Table 1.1 Advantages and Disadvantages of the Alternatives
Increased store profitability
High sales personnel motivation
Recognized/Values individual achievement
Aggressive competition among sales personnel
Relational gaps among sales personnel
May result into customer dissatisfaction
2) Group Sales
No competition among sales personnel
Decrease individual productivity
Can undervalue individual skills
3) “Double-Quota” Incentive Scheme
Increase sales personnel motivation
Low sense of responsibility
Some under-performers may feel pressured
4) No Incentive but more benefits (SSS)
Job stability of employees
Can be taken for granted
VI. Decision / Recommendation
After weighing the advantages and disadvantages of all the alternatives in line with the decision criteria, the group believe that as a manager the best way to motivate the employees of the Gintong Hiyas jewelry store is by adapting the Alternative #3. Implementing the “Double Quota” incentive scheme, would be the most effective and efficient way to increase the employees’ productivity without the risk (or with a lower risk) of sacrificing the harmonious working relations among the employees. Doing so would encourage the employees to cooperate with one another, instead of competing with each other. Through this incentive system, they will be able to work as one unit with the goal of increasing their over-all sales that in return would improve the store profitability.
In general the group believe that rewarding employees in terms of their performance in sales productivity can make them feel that they were
recognized and appreciated for their contribution to the company’s profitability. In this way, employees will also be involved in the overall objectives of the company as well as in their specific role and goals as a group and as individual employees.
In addition to that, given the context that we have a collective orientation, it was assumed that employees will strive more to achieve the said goals since it will benefit the group as a whole. Thus, choosing the said alternative will be beneficial to the overall objective and responsibility of the company, as well as its employees.
VII. Implementation (Plan of Action)
Now that the alternatives have been evaluated, the group has led to the decision of implementing the “Double-Quota” incentive scheme. Moreover, to perform the said alternative, the following steps are to be followed:
The manager will hold a general assembly to meet with the current employees and discuss the objectives of the new incentive system that would be implemented. Protocols and rules of the new system will be discussed and should be consulted with the employees to be able to allow them to participate in decisions that may affect them. After the thorough deliberation, new employees will then be oriented about the system. Team building activities will be carried out to develop trust and teamwork among the sales personnel, as well as to instil to them the primary goals of the company. This will be done at a regular interval. A period of six months (pilot test) would be allotted in order to monitor and then evaluate the efficiency of the new scheme. Shall there be issues and drawbacks regarding the system discovered within this observation period, the system will be revised accordingly. Employees will be evaluated at the end of each month. Peer checking and feedbacks from them will also be used. If the new scheme has proved to be efficient during the given period of six months the manager would prepare a proposal to the (higher) management regarding the implementation of the new incentive scheme to the whole company.
VIII. Contingency Plan
If the chosen alternative did not work after the three month period, then the management would implement the next “best” alternative based on their decision criteria which is the Alternative # 2 . In this way, the employees can be motivated to work harder in order to increase their sales collectively as a group.