Csi Measurement Compensation Systems 10 Years into the Future

AC411 ESSAY SUBMISSION 5

CSI MEASUREMENT COMPENSATION SYSTEMS 10 YEARS INTO THE FUTURE

Introduction
Catalytic Solutions, Inc. was founded in 1996 by Steve Golden and Bill Anderson. The company developed new proprietary manufacturing process for catalytic converters. These converters promised better performance at a lower cost and used 50-80% less Platinum Group Metals (PGMs) than regular converters. This was especially beneficial for CSI because the costs of PGMs were rising dramatically in the early 2000s. This saving translated into a $40 saving for a small vehicle converter to $200 saving for converters used in bigger vehicles. Catalytic Solutions, Inc. was able to successfully establish itself in the market that had substantial barriers to entry. The reasons behind this were simple; CSI used advanced technological processes that were patented and innovations that were difficult to emulate. As a result, the company was growing rapidly. By 2002, CSI was working with most major automakers in the world, getting recognized for its efforts and successes, developing applications for other markets and attracting the best talent. The company’s operations were not profitable yet, but with rising sales this was soon to change. Today, it is a large public company that has operates in three different markets: catalytic converter market, light duty diesel market and power generation market. [1]

Compensation systems in the early 2000s

When the focus was solely on catalytic converters and a smooth entry into the

market, the compensation system had three components:

Base salary: Base salaries were below the industry median and raises were modest and in the 4-5% range. There was not much difference in salaries paid to top management and salaries paid to the engineers, which contributed to a positive atmosphere and a flatter structure.

Bonuses: In the early 2000s when the operations were still non-profitable the focus of incentive system was on non-financial measures. There was an emphasis on getting the culture and work environment right; CSI managers believed that this approach would soon turn into financial successes. Bonuses were based on team effort rather than individual effort. This not only helped foster team spirit, it also helped address one of the inherent problems of incentive based systems – employees at CSI were motivated to contribute to the overall interest of the organisation rather than act in their personal interest to achieve targets and bonuses. However, team based efforts may have discouraged employees as they may have felt that they have little or no control over the results of the overall organisation. The bonus was based on achieving new OE commitments, execution of existing businesses and building of infrastructure. Every year, these were defined and altered to the current year’s priorities and goals.