Read the case study on page 529, \"Employees Own Bob\'s Red Mill\" and answer th

Question

Read the case study on page 529, "Employees Own Bob's Red Mill" and answer the three questions that follow it. 1. Which type of incentive pay are described in this case? Are these based on individual, group, or company performance? 2. Would you expect the motivational impact of stock ownership or profit sharing to be different at a small company like Bob's Red Mill than in a large corporation? Explain 3. Suppose Bob's Red Mill brought you in as a consultant to review the company's total compensation. Explain why you would or would not recommend that the company add other forms of incentive pay, and identify any additional forms of compensation you would recommend for the company's employees. Please use examples from the chapter to support your answers!

Explanation / Answer

i) Pay for performance: It includes profit sharing by individual based on company performance.

ii) Stock ownership plan: It is based on group of employees whose share is put in employees stock and one will receive it after retirement.

2. Motivational impact of stock ownership or profit sharing is different at a small company. Profit sharing has a direct impact on performance of an individual which drives the company’s performance. The more a person put his effort the more sales he make and will receive more incentive thus it directly impact an individual to put extra effort. In case of employee stock ownership, it depends upon the company performance and its share value in market. Thus employee has indirect impact on it but not involved directly in this affairs because there are many other factors other than employee performance which drives company’s performance. In terms of motivation, it has mild effect on an individual.

3. With the implementation of employee’s stock ownership plan, the employee will be benefitted if they see a long term future with the company but for those employees who believes in frequent switch to gain growth it is of less motivation. Thus company would implement another incentives plan based on performance of an individual which will give benefit to an individual in short run. Example of such programme is performance based rewards by colleagues, subordinate etc. the value of reward depends upon the quantum of value that an individual generate for the company.

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