Student # 1401424
The Hotel Paris Case- A Look at Incentives
For my project, I chose to analyze the Hotel Paris, and specifically focus on the issue of incentivizing key positions throughout the company. For the Hotel Paris, and Lisa Cruz, there are many key issues to be addressed in this case. Some of the underlying problems are as follows:
The current incentive plan for the Hotel Paris doesn’t link pay and performance in any effective way. This also includes the awarding of merit raises, which are awarded across the board—which lead to a lack of motivation to outperform others. There is no bonus or incentive plan linking employee performance to strategically relevant employee capabilities, such as friendliness, or speed of check-ins/check-outs. Only 5% of the workforce (hotel managers) is eligible for incentive pay. The difference in incentives between low performers and high performers was too miniscule to create effective motivation.
With these considerations in mind, some new criteria have been established. These new criteria include the following:
At least 90% of Hotel Paris employee’s must be eligible for a merit increase or incentive pay that is tied to performance. At least a 10% difference in incentive pay between a low-performing and a high-performing employee. New plan must include: specific bonuses and evaluative mechanisms linking employee behaviors in each job category with strategically relevant employee capabilities and behaviors.
In considering what course of action to take, analysis of several different types of incentives was considered. Some of them include:
Merit Pay—an increase in salary based on individual performance, which then becomes a permanent part of the employee’s base salary
Piecework Plan—an incentive that awards workers a sum of monetary reward based on each unit he/she produces, linking results and rewards regardless of output, with possibilities for premiums if standards are exceeded.
Recognition-based awards— an incentive that doesn’t require a monetary component, but may also include this. Studies have shown that recognition has a positive impact on performance.
Scanlon Plan—an incentive plan devised by Joseph Scanlon in 1937, which features: a philosophy of cooperation (no “us” vs. “them”), clear corporate identity, competence in selection and training, an involvement system which incorporates employee idea up the chain of command, and a sharing of benefits formula.
After looking at these issues, I developed some answers for each of the questions. These are listed below.
1. Discuss what you think of the measurable criteria that Lisa and the CFO set for the new incentive plan.
a) At least 90% (and preferably all) of the Hotel Paris’s employees must be eligible for a merit increase or incentive pay that is tied to performance
While enabling 90% of employees to be eligible for merits or incentives is a good idea, it could also become very costly, so close analysis of the profit margin must be made beforehand.
b) There must be at least a 10% difference in incentive pay between a low-performing and high-performing employee.
A 10% difference in the levels of incentives will help to motivate those who were just doing the bare minimum to improve their performance, and perhaps create an attitude of competition between their peers.
c) The new incentive plan has to include specific bonuses and evaluative mechanisms that link employee behaviors in each job category with strategically relevant employee capabilities and behaviors.
Lisa needs to find ways to link rewards to improved organizational financial performance, otherwise the expense is not justified. She can do this through some of the following methods:
i) Trackables—Tracking several variables, such as room occupancy rates, increased number of return visitors, increased customer satisfaction (gleaned through the review of customer comment cards), and employee...
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