Marshall & Gordan : Designing an Effective Compensation System

Marshall & Gordan : Designing an Effective Compensation System

 (Part A)        Marshall and Gordan is a leading public relations firm that has recently introduced a new service called Executive Positioning Practice (EPP) which unlike their traditional Public Relations work requires a lot of team work as opposed to individualistic approach. The existing Compensation System of  Marshall & Gordan is based on individuals performance and discourages teamwork. As such we need to formulate a new Compensation System which encourages collaboration and relates the employees earning with the amount of team work they put.

However while designing the new system we should also take care that interest of  big consultants of the firm are not undermined since there walking out will affect the business of the firm in a big way because, being very influential they will most probably walk away with clients. Also there walking away will affect the firms new venture of EPP because these high profile  consultants can prove to be a good source of business leads to EPP.

Thus while designing the new Compensation System for Marshall & Gordan we need to address following issues:

1. Figure out the processes which encourage individualistic behavior  in the firm and rectify them.
2. Address the concerns of Big Consultants.
3. Laying out an incentive based pay structure which would promote  Collaboration and Team Work among employees.

1. The following processes in the existing Compensation System promotes individualistic behavior among employees :

1. In the current system the employees whose credits are less than their salary are not eligible for bonuses. This policy leads to reluctance in employees to share their credits with others because they are more concentrated towards aggregating their credits.
2. Further the current system follows a tiered system for deciding the percentage of bonus allocated to a Consultant. Due to which each consultant is aiming for highest Bonus Tier and therefore prefers working alone so that he need not share his credits with others.

Following measures should be taken to address above issues:

1. There should be no minimum cap to accumulated number of credits to be eligible for bonus. All employees irrespective whether there credits are greater than salary or not  should be eligible for bonus.
2. To encourage employees to share credits the firm should replace the tiered bonus system with a fixed bonus percentage for all.
   

2)        It is recommended that the new Compensation System should follow fixed salaries/ wages for the employees . This would make sure that none of the employees is discouraged since all the employees would be treated at one level. However in order to compensate the loss which the Big consultants would suffer due to decrease in Bonus percentage, their salaries should be fixed at a high level i.e. instead of ($180,000- $250,000) it should be somewhat near to $500,000.

3)        Incentive based Pay Structure

Since the introduction of Executive Positioning Practice (EPP) service the Marshall & Gordan has two main Revenue sources:

1. Public Relations (PR) Work and
2. Executive Positioning Practice (EPP)

And they feel that EPP will be a game changer in the current competitive environment.

PR Work involves Origination and Execution. The Origination involves finding new opportunities in various Industries (practice) while Execution involves doing the PR Work in generated leads or service areas to generate revenues( Exhibit 1a).  
EPP service also involves  Origination and Execution. However Origination of business opportunities for EPP service is more significant than that for PR Work because in the long term EPP business Execution itself can spawn PR Works  for the clients which the firm has not served before. And since an EPP business can open doors to many future PR Work therefore EPP Execution is much more significant than PR Work Execution.