BABSH 3: What Are The Advantages And Disadvantages Of Using Bonus Schemes Throughout Dezell Ltd: Performance Management And Reward Assignment, GCD, Ireland

Dezell Limited is an Irish subsidiary of a large US company. About 200 people are employed in the manufacture of electrical components. About 150 of the workforce work on the production and packing lines, 15 in warehousing and delivery, 12 as external salespeople, 6 as desk-centered salespeople, and the balance in general administration and management.

The US owners are very unhappy with the current level of profitability. Both they and the local Irish management agree that there are three key problems:

1) sales are disappointing but the market is strong;

2) the level of defective products reaching the end of line production is too high;

3 ) middle and supervisory management does not appear to be seriously concerned about the problems in 1 and 2.

The US owners use bonuses in their US-based subsidiaries. They propose to send over a US executive to implement a company-wide bonus plan to improve performance in the three areas of problems.

You have been asked to advise the company under the following headings:

1. What are the (at least two) advantages and ( at least two) disadvantages of using bonus schemes throughoutDezell Ltd to improve performance in the problem areas?
2. What would be some key criteria in designing and implementing bonus schemes?
3. Recommend alternative options for improving performance in Dezell Ltd