Eva

3 Pages 760 Words

Situational Analysis and Key Facts

Mr. John Duckworth is the president and controlling shareholder of Duckworth Industries. In 1992 he decided that a change was needed in Duckworth’s management incentive program. The new plan would benefit both shareholders and managers and would also keep Duckworth at the forefront of incentive programs. He is a deep believer in incentives to motivate employees. In 1950’s he took over a plant that had an operating loss of $2.7 million a year and implemented what was at the time a “state of the art” incentives program. When he started his own business in 1971 sales grew from $400,000 to nearly $125 million by 1992. He has since acquired many other companies and now has 775 employees.
Mr. Duckworth has six different incentive programs. These programs not only benefit upper level management, but also plant level employees with the attendance bonus. The idea of pay for performance is a key in the Duckworth family. One senior executive said that “we put incentives, within reason, behind everything we can.” To compliment the attendance bonus there is also a quality incentive for plant and shift supervisory levels, while all employees benefit from the profit-sharing plan. Employees receive separate checks for incentives so they can see every month how performance benefits them.
The senior management team had other incentives above and beyond the incentives of all the other employees. Senior managers had an annual incentive compensation program and a long-term incentive program. Both of these plans took on dramatic changes from 1983-1992. Before 1990, the annual incentive program provided managers a bonus of up to 50% if they if certain target levels of performance were reached. These measures included things such as cash flow, sales growth, inventory turns, etc.
In 1990, however, Duckworth decided to base the incentives on sales growth and profitability rather that annual targets. The i...