Becca Lynn Stanton is a product manager whose compensation is 100% variable pay and based on the profits earned by her product line. Since she is risk-averse, she tends to favor production proposals that increase her income and status, but she is leery of production proposals that are likely to increase profits if implemented successfully and are equally likely to decrease profits if these are not implemented properly. What would it take to get her to consider a new production system?
What will be an ideal response?
Management could change Stanton's compensation to base pay plus variable pay. She is leery of the new production system because she is risk averse and perceives a higher variance of her compensation. Including base pay allows management to reduce the variance of her total compensation, which might be sufficient for her to consider the new production system.
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