mcdonald's corporation-designing an incentive system

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McDonaldCase StudiesReward System

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Plan 1972Base SalaryRange 1: $15,000

Range 2: $10,900

Range 3: $6,800

*Salary for Range 2 is not given, thus the assumption is the average of Range 1 and Range 3.

Quarterly BonusProjected Sales Volume5%

Operating Factor5%

QSCA10%B5%Unit Volume2.5%-10%

Plan 1972Is Very Subjective

Complicated

Different timing of bonuses:Cost ObjectivesQuarterlyQSC Standard & Volume IncreasesSemi-annually

Plan ABase SalaryRange 1: $15,000

Range 2: $10,900

Range 3: $6,800

*Salary for Range 2 is not given, thus the assumption is the average of Range 1 and Range 3.

Semi Annually BonusPoints based on six factor (Max 12pt.)12pt40% of Base Salary11pt35% of Base Salary10pt30% of Base Salary ||4pt0% of Base Salary

Yearly Salary IncrementAverage of 2 semi-annual points12pt12% Salary Increment11pt11% Salary Increment10pt10% Salary Increment ||1pt1% Salary Increment

Plan BBase SalaryRange 1: $15,000

Range 2: $10,900

Range 3: $6,800

*Salary for Range 2 is not given, thus the assumption is the average of Range 1 and Range 3.

Annual BonusRefer to Note Below and Confirm.

TRY RECALCULATE:$500,00010% X 10%(Increment) X 500,000=5,00020% X 12%(Profit) X 550,000=13,200Total=18,200

$501,000-700,0007% X 10%(Increment) X 700,000=4,90017% X 12%(Profit) X 770,000=15,708Total=20,608

>$701,0007% X 10%(Increment) X 800,000=5,60015% X 12%(Profit) X 880,000=15,840Total=21,4405

Plan CBase Salary$0-%500,000Unit Sales($)Salary ($)300,00010,500

400,00011,500

500,00012,500Bonus> $500,0002% (Increment of Unit Sales) X $12,500

i.e.:Sales Volume $750,000Base Salary12,500Bonus (2% X $250,000)5,00017,500*Managers salary for inferior locations will be paid $12,500 for 1 year

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Plan D

First-line Manager PreferencePLAN 1972-Most balance reward system

-Subjective and sales Volume

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