Marshall & Gordon: Designing an Effective Compensation System (A) Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Issues/problem with the existing compensation scheme

There were several issues with the existing compensation scheme that impact the performance of the employees and consultants. The main issue with the existing compensation scheme was that it makes the collaboration and association throughout the firm difficult. Secondly, existing compensation scheme rewards the entrepreneurism with no qualifying factors that inspire people to share the pie.

The compensation of the partners and principals include the combination of both salary and annual bonus. The salaries ranged for the principals started from $100,000 to $150,000 and for the partners the salaries were started from $180,000 to $250,000.Each partner and principal in the firm get different amount of bonus from each other which is another issue of the existing compensation scheme as the many employees in the firm were not satisfied with the existing compensation scheme and considered it biased system.

The performance based incentives in the firm were calculated with the help of two part formula. On the basis of this formula, consultants of the firm earned credit for both business originated (“O”) and executed (“E”).The amount that client paid to the firm was credited two times, on one occasion as originated (“O”) while other time as executed (“E”).According to the current compensation scheme, the individual consultant bonuses were centered on the total of originated (“O”) and executed (“E”).While the project that sold and delivered by the partners jointly ,according to current compensation plan they negotiated with each other on how to split the amount of originated (“O”) and executed (“E”) which was another issue.

Under the current compensation plan, the company also introduced the tiered system according to this, the more revenue generated by the consultant the more percentage of bonus was allocated. This means the more credit bring into the firm by the consultant, the more their share will be. This was another problem with the existing compensation plan as different percentages for bonuses were allocated on the basis of originated (“O”) and executed (“E”) credit.

Another issue with the existing compensation plan was that each director in the firm can increase the amount of compensation of their consultants by around 10% in order to appreciate outstanding performance but performance metrics of this 10% bonus were confusing as also claimed by the consultants who considered it biased or arbitrary.

The another problem with the existing compensation plan was that all the consultants that were below the level of principal and all the employees that are non-consulting only salaries were given to them without any compensation.

Crafting compensation scheme to resolve the problem

It is important to develop an effective compensation plan since it provides many benefits to the firms that help them to survive in the highly competitive environment. It is crucial for the Marshall & Gordon to develop well designed compensation that motivate and encourages the employees of the firm to perform effectively and enhance their productivity. Furthermore, effective compensation plan must reflects the values and overall strategy of the firm.

The main advantage of an effective compensation plan is that it may result in the recruitment and retention of the employees. As, the potential employees normally see the compensation plan of the firm earlier accepting or rejecting any positions. A compensation plan of the Marshall & Gordon must include the comprehensive information regarding the salaries packages and other types of benefits. The firm’s compensation plan also must influence employees throughout the firm while controlling compensation costs and ensure the quality of the plan. It must pushes the right behavior among all the employees and must positioned on the metrics that determines high performance of the employees.

It is also important for the firm to communicate the detail information regarding compensation plan goals with its employees and consultants in order to successfully develop and implement it. However, in the highly competitive environment of the Public Relations industry, it could be tough for the Marshall & Gordon to successfully develop and implement an effective compensation plan that result in high motivation and retention of the firm’s workforce.

Also, some factors that must be a part of firm’s an effective compensation plan include, wages scale, Bonuses, additional commissions and health related benefits as they can be effective way of getting higher performance from the employees and consultants.

In order to design an effective compensation system, it is important for the Marshall & Gordon must consider both the internal and external factors that might impact the quality of the compensation plan..................................

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