Write a comprehensive CASE SUMMARY and answer the questions asked in the case st

Question

Write a comprehensive CASE SUMMARY and answer the questions asked in the case study ( Management subject)

Case for Critical Analysis Kimbel's Department Store terson has been reading about a quiet revolution based on hourly wages and a 05 percent commission on saceping department store retailing and has decided to give it a $500,000 in sales Under the new plan, the annual pay would ?At stores such as Bloomingdale's and Bergdorf Goodman. be $35,000 based on 7 percent commision on ales o! nunagers are using commission pay to motivate salespeople. Au $500,000. Patterson implemented the new system in two area Bergdorfs. for example, a top-tier salesperson in women's stores first and plans to roll it out across the chain within the apparel can earn nearly $200,000 a year next six months Patterson wants to implement commission pay at Kimbels, Juan Santore, who works in the men's shoe salon, is enthusi s regional chain of upscale department stores based in St. Louis astic about the changeover. His pay has increased an average o Kimbels has long used commissions in departments such as $150 per week. But in other depari dectronics and appliances, where extra sales skill pays off, but gerie, employees are less enthusiastic. Making enough sales pe Panterson believes extending the system storewide will attract week to earn their previous salary is nearly impossible, particu eter salespeople, increase motivatio earn more money. For example, under the old plan, a new slesclerk in women's wear would earn about $18,000 a year percent ments, such as women's lin- larly when the economy slows down. Even during the holiday season, many employees saw their pay decrease an average of 8 n, and enable employees

Explanation / Answer

The case is about changing the compensation paradigm of the company in order to bring in a greater sense of motivation and consequently change behaviour and induct better sales people in the organization. Frances Patterson has read about how sales commission based compensation system and which has resulted in top sales people earning commission to the extent of $200,000 in few stores. It was also being contemplated to introduce a similar system at Kimbel.

It is not that commission based pay has not been present at Kimbel. It has been used in sophisticated segments such as electronics and appliances but the plan now was to roll out a sales based plan all across the store. Under a fixed pay system a sales person was earning about $ 18,000 a year but with a commission based system, the potential pay was $35000. As a pilot the system was introduced in two stores with a plan to roll out across the entire chain in six months time.

However the pilot roll out saw mixed response. While some saw an increase of $150 per week in their compensation, for others making their earlier pay was itself becoming a challenge. Patterson was keeping a close watch on the rollout and she concluded that a commission based system was good for large one time purchases but not suitable small value items. Also the commission based incentive may induce the sales people to chase customers and lose their focus on after sales service, which may prove to be counter productive for the company.

Answers to case questions:

1. The switch from a fixed salary to commission based pay was based on motivating sales people through extrinsic motivators. This is as per the cognitive evaluation theory wherein extrinsic motivators such as enhanced pay out is a significant parameter influencing behaviour of individuals.

2. The high level needs such as growth, creativity, recognition and responsibilities may not be fulfilled by commission based system as it focusses on only increasing payout and not professional and individual growth and career progression.

3. As a customer, I would not prefer shops where sales people are motivated by commission alone as in those place, chances of mis-selling goes up in order to increase their pay out. Also after sales service is expected to be worse as there are no incentive to serve customers after sale is completed.

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