This question has two parts; be sure to answer both. First, what is the purpose of incentive plans? List the five keys to a successful incentive-pay plan. Second, imagine that you are the manager of a beauty salon that styles men's and women's hair, and also provides many other personal services, such as manicures, pedicures, and makeovers. What types of incentives might you give to your hair stylists to reward them for bringing in new customers? Give at least two specific examples of incentives at the beauty salon that are tied to realistic goals.

Question

What will be an ideal response?

Answer 1

The purpose of an incentive plan is to attract high-performing employees and to induce those already employed to be more productive. The five keys to a successful incentive-pay plan are: (1) simplicity, (2) clear goals, (3) realistic goals, (4) consistency with present goals, and (5) regular communication.

Common types of incentives are commissions, bonuses, profit-sharing plans, and stock options. As the manager of the salon, you might offer your hair stylists a higher commission on any new clients they bring into the salon over, say, a three-month period. You might set goals for the number of new customers each stylist must bring to the salon, and then reward those who meet the goal with paid time off or more prominent locations within the salon. You might also offer a bonus of, say, $500 to the three stylists who bring in the most new clients over the course of the next three months.