I. Point of View

The case study is viewed from the point of view of Elizabeth Santos who is currently assigned of the task of designing the store management systems and procedures for all the stores of Gintong Hiyas and the management of the company's two branches. The focus of the case are two the stores managed by Elizabeth so taking her point of view is the most appropriate since she has the knowledge and authority to these stores. The staff incentive system was also implemented under her supervision.

II. Analysis of the Case Situation
The original store opened in Quezon City in 1968 and sold a line of handmade gold and other jewelry. It expanded in the 1980s by opening four new outlets in different parts of Metro Manila. New lines of jewelry were added as sales expanded. Managing five stores became too difficult for the Santos Family; the original store in Quezon City was closed in 1989.

Elizabeth Santos joined the management of Gintong Hiyas after completing her Bachelor's Degree in Commerce in 1992. She designed the store management systems and procedures for all stores while managing one of the Gintong Hiyas stores herself. In 1995, she was asked to manage a store previously ran by her father.
In October 1995, Elizabeth introduced an incentive system to increase sales. Thirty percent of the daily wage of the salesgirl will be paid as bonus if the daily quota is exceeded. This resulted in increased sales and morale in the first few months. Employees in other stores were asking for the same incentive scheme. However, the Santos Family decided to wait before implementing the system in the other stores.
In early 1996, Elizabeth noted that the staff talked to each other less often than before. Though the sales increased, the relationship among the workers was disturbed. Salesgirls would race to serve one customer. They would also be aggressive to other salesgirls when one of "their" customers are served by other salesgirls. They would also ignore customers that "belong" to other salesgirls.

Elizabeth considered using a group incentive scheme. She also considered modifying the existing scheme, which proved effective in the year before. The objective is to identify the most appropriate incentive system for the whole firm. The goal is to increase profitability of the whole firm.

III. Problem Statement

What is the most appropriate incentive system to increase the profitability of the two stores?

IV. Identification and Evaluation of Alternative Courses of Action
1. Group Incentive System

Salesgirls will be paid a group bonus on the basis of the accomplishment of a sales quota for the whole store per month.

Cons: a. Risky because salesgirls might not agree to work with each other b. Possibility of freeloading of some salesgirls
Pros:
a. Competition for customers will be minimized b. Salesgirls will be encouraged to work as a team c. “Filipinos respond well to group incentives”
d. Salesgirls are encouraged to consider the profitability of the store for the whole month and not just per day
e. Ease of implementation and calculation of bonus payments

2. Individual Incentive System

Salesgirls will be paid on the basis of individual daily sales accomplishments.

Cons: a. Competition among the salesgirls b. Demoralization of workers due to competiton c. Inefficient and ineffective handling of customers since salesgirls tend to “mark” their clients d. Dissatisfaction since one salesgirl tends to accommodate only her previous clients to avoid argument with other salesgirls

Pros: a. Increased sales b. Salesgirls’ payment is dependent on her individual sales so there will be no freeloaders c. Bonuses are paid only when daily quota is exceeded

3. Salary would be given each week, and the 4th week, incentives would be added. Cons: a. There would be confusion on how their salaries would be computed b. Salaries would be added to the expenses every week

Pros: a. Minimize competition rate b. Workers would be provided with money that would help them financially c. It would motivate the workers

V. Decision and Rationale Plan
In accordance to the advantages and disadvantages cited, the most appropriate incentive system would be the group incentive system. This method greatly reduces the problem of competition among the salesgirls as observed in the stores since their performance will be evaluated on the basis of group output. It will also help them develop team-oriented skills and to consider the profitability of the store for a longer term, the bonus will be paid on the basis of the output per month and not just per day.This is favorable since there might be many days when sales are very low and only a few days when sales are high. The issue of freeloading could be addressed easily because the members of the family personally supervise their respective stores.

VI. Implementation

1st – 2nd day | There would be an orientation for the salesgirls | 2nd - 4th day | Explain the benefits they could get from the incentive financially and socially | 4th-7th day | Allot time for the salesgirls to adjust to the new system and assess the appropriateness of the system. | 2nd week onwards | Observe the effect of the group incentive system |

VII. Contingency Plan

Gintong Hiyas
Fourth Business Case

MGT 101 Section C