Vetements Ltee

Are incentive programs good for a company or bad for morale? This all depends on whether the rewards support corporate goals. These incentive programs could enhance the goals and increase profits and customer loyalty, or the incentive programs might create competitiveness and back-stabbing among employees, and that is not best way to run a company. Vetements Ltee encountered competitiveness and back-stabbing among employees when it introduced its new incentives program.

Vкtements Ltйe is a chain of men's retail clothing stores located throughout Quebec, Canada. In 1993 the company introduced a new incentive system for store managers and sales employees. Each store manager would receive a salary along with an annual merit that would increase if store sales exceeded the targeted goal regarding store appearance, store inventory management, customer complaints, and other performance measures. Sales employees were paid a fixed salary plus a commission based on their percentage of sales. Commission was about 30% of their pay.

Senior management believed that this new incentive system would improve service and sales volume. However, it did not. Soon after the program was brought into effect, senior management began to receive complaints from the store managers regarding the performance of sales staff.

Sales staff would stand by the door and “tag” customers as theirs when the customer would enter the store. Staff began to argue over customers, became overly aggressive thereby intimidating customers. While they argued, parts of the store were left unattended. Inventory and reordering tasks were left neglected. When 30% of an employee’s paycheck is based on commission, employees want to spend their time selling and not stocking.

In an attempt to rectify these problems, Vкtements