Arck Case
Arck Systems Case
1. A number of elements in the two companies’ compensation plans are different. Which of these differences should most concern Bryan Mynor? Explain
The following elements in the compensation plans are different between Lux Software and Arck:
Base Pay (They both receive base pay, but it is almost double the amount the sales representatives receive at Arck than the representatives at Lux Software);
Quota (The representatives at Lux Software must reach sales worth $100.000 dollars per quarter, at Arck on the other hand they must reach sales worth $1.000.000 per year);
Sales commission (At Lux Software the representatives receive 4%, while at Arck they receive 9%);
Cap (A Cap is the sales level after which a salesperson will not make commission on further sales. This doesn’t exist at Lux Software and with Arck the limit is $6.000.000 in sales per year).
Other bonus (There are no other bonuses at Lux Software, while if you reach the cap at Arck the representatives get a $50.000 bonus).
The most important difference for Bryan Mynor is probably the sales commission with a focus on the accelerators. Because of the accelerators the payroll is stretched out a lot. For instance, the difference in payroll between the 1st and 10th percentile is $2.8mn.
2. In a table compare the following characteristics of a Lux’s Sales Rep and an Arck’s Sales Rep: product sold Profit Margin, Sales Nature (which is more technical and which more relationship?), Sales level of difficulty, Pay Level for Avg. Sales Rep, Pay Level for Top Sales Rep
Lux’s Software Sales Rep
Arck’s Sales Rep
Product sold profit margin
Technically-orientated
Relationship-orientated
Sales level of difficulty1
Harder
Easier
Pay level average sales rep
$120.000, -
$130.000, -
Pay level top sales rep
$3.600.000, -
$565.000, -
3. Should mynor propose scaling back Lux software’s commission accelerators? Are there other changes to Lux software’s compensation plan
1. A number of elements in the two companies’ compensation plans are different. Which of these differences should most concern Bryan Mynor? Explain
The following elements in the compensation plans are different between Lux Software and Arck:
Base Pay (They both receive base pay, but it is almost double the amount the sales representatives receive at Arck than the representatives at Lux Software);
Quota (The representatives at Lux Software must reach sales worth $100.000 dollars per quarter, at Arck on the other hand they must reach sales worth $1.000.000 per year);
Sales commission (At Lux Software the representatives receive 4%, while at Arck they receive 9%);
Cap (A Cap is the sales level after which a salesperson will not make commission on further sales. This doesn’t exist at Lux Software and with Arck the limit is $6.000.000 in sales per year).
Other bonus (There are no other bonuses at Lux Software, while if you reach the cap at Arck the representatives get a $50.000 bonus).
The most important difference for Bryan Mynor is probably the sales commission with a focus on the accelerators. Because of the accelerators the payroll is stretched out a lot. For instance, the difference in payroll between the 1st and 10th percentile is $2.8mn.
2. In a table compare the following characteristics of a Lux’s Sales Rep and an Arck’s Sales Rep: product sold Profit Margin, Sales Nature (which is more technical and which more relationship?), Sales level of difficulty, Pay Level for Avg. Sales Rep, Pay Level for Top Sales Rep
Lux’s Software Sales Rep
Arck’s Sales Rep
Product sold profit margin
Technically-orientated
Relationship-orientated
Sales level of difficulty1
Harder
Easier
Pay level average sales rep
$120.000, -
$130.000, -
Pay level top sales rep
$3.600.000, -
$565.000, -
3. Should mynor propose scaling back Lux software’s commission accelerators? Are there other changes to Lux software’s compensation plan