Question

The HR director at Clearwater Electronics has been asked to advise the board on a proposal to implement a variable compensation plan for top executives in each department. The CFO wants the HR director to explain how the plan will encourage productivity in top management positions. Which statement best explains why a variable compensation plan would help increase performance

Answer 1

Answer:

The incentives will only be given if the company reaches it's goals, so the managers will be motivated to meet their targets.

Explanation:

A variable compensation plan is that which is not part of the basic compensation offered at the begining of the contractual relationship. It is more like an add-on which is structured in such a way the employee goes home with more financial and or non financial benefits than what they would have been paid if the goals were not met.

Because this increase in benefits, which in most cases is financial is tied to the employee attaining their goals, it motivates them to increase their performance. As they hit their targets and or goals, the company also improves and advances because the employee goals and or targets are miniature versions of the business goals.

Cheers!

Answer 2

Answer:

-The incentives will only be paid if the company does well, so the managers will be motivated to meet their goals.

Explanation:

Variable compensation is one that is paid as a bonus or commission for meeting a set target. It is an incentive payment that rewards an employee for meeting a goal.

On the other hand base salary is a fixed amount that is played regardless of performance.

In this scenario where the HR director at Clearwater Electronics has been asked to advise the board on a proposal to implement a variable compensation plan for top executives in each department, this will motivate the top executives to perform well since they will be compensated if the company meets their goals