Olympia Machine Company Case Study Example | Topics and Well Written Essays - 500 words

Olympia Machine Company - Case Study Example However, there are weaknesses in the current compensation plan. Regardless of the large volume of sales, there are high fixed selling expenses and also common measures that determine salary increases of the salespeople have not been established by the management. Some of the key issues that any new compensation plan must address include how to poise a balance between capital equipment and sales. A salesperson must be able to not just take any order that comes along but sell. Secondly, a weighted plan that allows a salesperson to assess what pays off and what does not should be addressed, in order for him or her to be more resourceful. Finally, there has to be a common standard where salary increases for all like employees should be known. This is of importance since the management is able to weigh how prolific a salesperson is. In the point system, together with a salary, a salesperson is given bonus points in relation to his or her performance in the sales activities. However, with this system, detailed reports about the performances of the salespeople are required thus increasing the organization’s overhead cost. In this plan, a salary, expenses and a commission on sales were taken into consideration. This way, the salespeople had security because they were assured of a salary and were still motivated due to the commission rates incurred on several products. However, this would mean that the commission plan with specifications would result to a cut in current salary base for most salespeople. The bonus plan involved giving the salespeople an opening to earn bonuses from their sales, without putting a boundary past a target. They also received the same salary as before. However, upholding a liable sales-expense-to-sales ratio would go against the Company’s philosophy of upholding such. I would therefore recommend the