MEMO
TO: Janet Durham, Vice President of Human Resources
SUBJECT: Compensation plan and reward packages offered to the new Sales Team ____________________________________________________________

____________ As the company finalizes the recent acquisition of Envirotech and have selected our new sales team, I believe it’s necessary to review the compensation plan and reward package created for the new sales team. Like Lincoln Electric, a Cleveland-based manufacturer of welding machines and motors, we will follow the cardinal rule of compensation by paying and promoting for productivity, and only for productivity (Cascio, 2005). In this memo, I will explain; • Our new compensation plan • Why it will work • The components of our reward system that will motivate our staff • The compensation plan’s benefits to the employee and the company. Like 90% of United States employers, we will use a merit-pay system (Bennet, 1991. pp.b1, b2). Each employee’s salary will be set by the job requirements of his or her position and by the amount of experience he or she brings to the job. We will let each employee’s yearly production rate and grade determine the amount of his or her yearly salary increase. All salaries will be within the fair market guidelines for similar positions and in line with any Fair Employment rules and regulations. Hicks Waldron, former chairman and CEO of Avon Products Inc. says, “It took me a long while to learn that people do what you pay them to do, not what you ask them to do,” (Bennett. 1991. Wall Street Journal, p.r3). This statement has influenced strongly how I approached our payment system. Our goal is to not allow this system fail. To make this plan successful, we will have to follow work guidelines for a merit system (Cascio, 2005); we will establish high standards of performance, make our performance-appraisal system as accurate as possible, train our supervisors in the mechanics of performance appraisal and in the art of giving feedback to subordinates, and use a wide range of increases. When the employee and manager set the employee’s yearly objectives, we will insist he or she strive to exceed the goals set. Another goal that is important will be to cut down on inflated evaluations. The manager will base his or her review off actual production data and the employee’s attitude. Our managers will be ready to give constructive feedback on areas of opportunities for each employee. Each employee’s performance and attitude will dictate his or her yearly raise. It will fairly fall in line to the extent in how the employee exceeded or met his or her goals. Not only will we compensate our employees for their hard work, will offer them rewards. The factors that help measure the amount of compensation we offer to our employees will coincide with the components within our reward package. Our employees will receive rewards when they well exceed their goals and objectives, win monthly production contests, and excel expected customer service requirements. The rewards will offer intrinsic and extrinsic value to the employee. Our managers will always be sure to give praise when a good job has been done. Not only are we going to praise our employees, we will offer up to $250 gift cards for the winner of the monthly contest. At the end of each year, we will offer a $2500 gift card along with a plaque and small luncheon with the Sale’s Department President as a reward to the employee with the highest sales numbers. This number will include best customer service rating, most sales to new clients, and most retained customers. The rewards offered to employees will reap benefits for both the employee and company. Along with fair compensation and outstanding rewards, we will offer a full benefit package. The package will include: health insurance, disability insurance, workers’ compensation if needed, optional life insurance, sick leave, flexible time off days, pension plans, and a 401k. We will also offer a Thrift Incentive Plan. The company will match up to $.80 for every $1 the employee contributes, up to 5% of the employee’s gross salary. By doing this, the company will have a chance at increasing the investment portion of its portfolio. In the end, we our employees to feel they are highly valued and their hard work is appreciated. I consider our employees one of our greatest assets, and believe that a company should protect the assets that make it successful.

References

Milkovich & Newman, op. cit. See also Bennett, A. (1991, Sept. 10). Paying workers to meet goals spreads, but gauging performance proves tough. The Wall Street Journal, pp. B1, B2.
Cascio, Wayne F. (2005). Managing Human Resources, Chapter 11: Pay and Incentive

Systems.

Bennett, A. (1991, Apr. 17). The hot seat: Talking to the people responsible for setting pay. The Wall Street Journal, p. R3.