ALLISTON INSTRUMENTS

The Alliston instruments compensation system and strategy design and implementation, had a major negative aspect that they did not focus on specific performance objectives. The incentive program which Alliston have set for their employees did not have any objectives for their production and performance tasks. The purpose of their incentive plan was to focus and align the organization by communicating and rewarding the achievement of company goals. In my view, Alliston Instruments should have implemented a compensation mix strategy. It would have allowed them substantial portion of compensation to be allocated to short-term incentives and long-term equity incentive, i.e., percentage of pay allocated between base pay and short-term incentive and long-term equity incentive pay. The base salary of the employees should have based on external market data, internal equity value, and performance of the company and in the end an individual performance. In terms of short term incentive Plans Company should have criteria in which the overall performance of an employee should be measured on different tasks and should set up minimum performance targets. This way employee would work hard and will not compromise with the quality of the products. In return, the short term incentive plans varies company to company, however the minimum incentive plans generally comprises 10-20% of the base of total direct compensation. Based on my study I recommend that Alliston should also introduce the annual incentive plans, the results of which should be measured in respective of total quality performance of the company. This strategy will help Alliston to be consistent in their quality production and eventually will help them to achieve their goals. This will also help the company to meet their minimum threshold financial performance. By achieving this, company can payout the short term incentive plans to their employees. In the terms of equity incentive, company can compensate their employees in the form of stock options. Generally supervisors and managers get compensate long term equity incentive for their target performance. When company hires a new supervisor or a manager, at the time of hiring the stock option should be granted to them vesting over minimum of three to five years period. In case of financial performance goals will exceed or the company stock prices increases, then the above element should deliver total direct compensation above the median of compensation ranges from production workers, supervisors and to managers of the Alliston instrument company. The above mentioned strategies will help Alliston to come back in the market strongly and with the implementation of long and short term incentive plans, employees will be motivated to achieve their goals by the means of team work and equal job objectives. On the other hand, Profit Sharing Plans tend to not pay off due to market competition and may be opposed by unions. An additional administrative cost will also likely affect some bonus pay outs and profit sharing due to increase of unnecessary manpower.