Actg case
What unique aspects of the Mexican environment does Jose Monteiro have to consider in designing and using his management control system?
Identify and evaluate each of the elements of Loctie’s performance-dependant compensation system. What changes do you recommend and why?
Performance-Dependant– profit sharing, salary increases, commission and bonuses
Profit sharing
10% of pretax income to employees based on work days and earnings
Use law as incentive program and employees take for granted
Salary increases
Semi-annual increases, every firm has unique package
Salary increase above inflation in line with aggressive group of firms
Employee boss determines base
Still considerable turnover – 78% in 18 months, top sales person leaves for better
Incentive comp plans
Sales ppl: spend time in areas with greatest profit – encourage to leave comfort zone and do high value added sales
Commission based on sales growth
What, if anything, should Jose Monteiro do about the competition among the sales people in the city of Mexico City Territories?
Lower tariffs, lower inflation and increases foreign competition and investment
Tariff on products they produce lowered from 37% to 15% (young US based company)
Increase competition for skill labour and exec -> low supply – bilingual being headhunted
Importance placed on bases, forms and timing of payment
Sales slowdown, cross firm competition - > tolerate or eliminate incentive
Sealant and adhesive firm – specialty chemical
Annual eps growth rate 22.4% - diversity without diversification
Geography: in 33 countries, with offices and joint ventures in others risk spread out
End use markets: 6 major markets – original equipment manufacturing, industrial maintenance, repair and overhaul, automobile manufacture, auto repair, auto body repair and consumer
Product usage: high expense to sales ratio – tailored products but many uses
Product diversity: new tech – silicon – widener sales offering
North
Identify and evaluate each of the elements of Loctie’s performance-dependant compensation system. What changes do you recommend and why?
Performance-Dependant– profit sharing, salary increases, commission and bonuses
Profit sharing
10% of pretax income to employees based on work days and earnings
Use law as incentive program and employees take for granted
Salary increases
Semi-annual increases, every firm has unique package
Salary increase above inflation in line with aggressive group of firms
Employee boss determines base
Still considerable turnover – 78% in 18 months, top sales person leaves for better
Incentive comp plans
Sales ppl: spend time in areas with greatest profit – encourage to leave comfort zone and do high value added sales
Commission based on sales growth
What, if anything, should Jose Monteiro do about the competition among the sales people in the city of Mexico City Territories?
Lower tariffs, lower inflation and increases foreign competition and investment
Tariff on products they produce lowered from 37% to 15% (young US based company)
Increase competition for skill labour and exec -> low supply – bilingual being headhunted
Importance placed on bases, forms and timing of payment
Sales slowdown, cross firm competition - > tolerate or eliminate incentive
Sealant and adhesive firm – specialty chemical
Annual eps growth rate 22.4% - diversity without diversification
Geography: in 33 countries, with offices and joint ventures in others risk spread out
End use markets: 6 major markets – original equipment manufacturing, industrial maintenance, repair and overhaul, automobile manufacture, auto repair, auto body repair and consumer
Product usage: high expense to sales ratio – tailored products but many uses
Product diversity: new tech – silicon – widener sales offering
North