Brotmeister Case Analysis

Q4. What kind of problems might come up before the implementation of the bonus (i.e. when you present your design to the management, workers council, etc.)? How would you convince the different parties? What kind of problems might come up when the bonus is introduced (in particular, to measure the impact of the bonus)? How would you solve them?

We do expect some initial hesitation on the part of management in relation to our bonus plan on the perception of it being more costly than the existing practice. However, we endeavor to convince the management by showing some potential benefits of the plan. With the aid of simulation, we can demonstrate that our plan creates effective incentive systems for stores manages to perform better which will lead to increase sales and profits. Therefore, in the medium to long term our proposed plan is more cost effective than the existing practice.

We also believe that there might be some unwillingness on the part of Workers Council to get onboard with this plan. They might wrongly assume that the new plan would create a tense working environment because store manager would like to increase its sales numbers and the pressure will be trickled down to the workers without much of the ‘upside’. However, this would be highly misplaced view as on closer inspection our plan not only creates incentives for store performance but also creates plenty of ‘upsides’ for workers in the form of larger bonus shares.

Moreover, our plan is robust enough to take into account the different regions and the sizes of the store. As we can see from the below table the sales are highly concentrated in the small size stores Our bonus plan --which is uniform in its application—will motivate the workers in the small size stores to increase sales as they can get larger share of the bonus pie. This plan will also have the added benefit of creating an internal positive correlation between workers and demand and offset some of the market externalities for increased sales.

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