1. RAY TECH PVT. LTD
• It observed few delay in their projects and
found that no proper cooperation and
coordination was there between technical and
marketing team.
• Ray was wondering what solution to be
implemented to get the two team to work in
sync with each other.
2. THREE SITUATIONS
1. Ray came up with a software reporton and launched on
2012. Nearly 30,000 doctors use this software.
Subscription is doubled every 6 months and subscription
rate is 2000.
2. 2013 Ray tech launched another product findoc.com
website with free appointment booking for patient but
charged doctors and practitioners for listing (free and
premium). The premium listing was opted by 30% of the
doctors and charges with rs 5000 as annual subscription. It
has 125,000 doctors from 10 cities.
3. The website records 4 million searches every month and
converts 1% of the searched into bookings and earns Rs 20
for booking an appointment.
3. • Ray Tech currently operates with two
product categories handled by 500 people in
various teams
• like Design & IT (60%), Marketing (20%),
0perations (50), Finance (11%) and HR (6%)
• Ray estimated that 10% more projects could
have been taken up if these delays could be
avoided.
4. • design an incentive plan/benefit-sharing plan
for the marketing and technical teams (or
which could be implemented
organization-wide),
• such that it would improve the cooperation,
identity, competence and involvement of the
team members across the teams. CPO
remarked, "I think we should use Scanlon
Plan to achieve these objectives."
5. QUESTIONS
• What are the various incentive plans that
could be used for a team or across the
organization?
• How do you think, the CPO of Ray Tech Pvt
Ltd., could design/develop a Scanlon Plan for
Its teams?
6. ASSUMPTIONS
1. It was assumed that the normal monthly
ratio of payroll costs to sales is 50%.
2. According to the Scanlon incentive plan, the
employees would typically share 75% of the
benefits.
3. And the firm sets aside usually a quarter
(25%) of this amount (75% OF THE
BENEFITS for the months in which payroll
costs exceed the standard)
7. SOLUTION- Q2
• Since the marketing and technical teams at
Ray Tech were not coordinating and
cooperating with each other, the management
decided to design a Scanlon incentive plan –
since it has five basic features
of Cooperation,
including
Identity,
Philosophy
Competence, Involvement System and
Sharing of Benefits Formula
8. • To design a Scanlon Plan the management has
to first calculate the total annual revenue of
the company , which would include revenue
from Reporton, findoc.com and from booking
of appointments.
9. TOTAL REVENUE
From report on From findoc.com From appointments
Doctor subscribing: Doctors listed 1,25,000 Searchers per month =
30,000 Premium listed doctors = 40,00,000
Monthly subscription: 30% Conversion rate = 1%
2000 Annual subscription = Earning per booking = rs
Annual revenue = 5000 20
30,000 x 2000 x12 = Annual revenue = Annual revenue =
72,00,00,000 1,25,000x30%x5000 =
18,75,00,000
40,00,000 x 12 x 1% x 20
96,00,000
Total = Rs 91,71,00,000
10. • It was assumed that the normal monthly ratio of
payroll costs to sales is 50%.
• Therefore, Ray Tech’s annual payroll cost would be
= Rs 91,71,00,000 x 50% = 45,85,50,000.
• Since, Ray estimated that the company would
have completed 10% more projects in the year, if
the teams worked in sync with each other, then the
company would have earned annual revenue of Rs
91,71,00,000 X 1.10 = 100,88,10,000
11. • Then the payroll cost should have been =
100,88,10,000 x 50% = 50,44,05,000
• However, the actual payroll
cost is 45,85,50,000
• Therefore, the savings/benefit
for the company =
50,44,05,000 - 45,85,50,000
=
4,58,55,000
12. • According to the Scanlon incentive plan, the
employees would typically share 75% of the benefits,
i.e., `3,43,91,250.
• And the firm sets aside usually a quarter (25%) of this
amount (3,43,91,250 )for the months in which payroll
costs exceed the standard i.e., 3,43,91,250 x 0.25 =
`85,97,812.50
• After doing these calculations the firm can announce
an annual incentive of 3,43,91,250 -
85,97,812.50
`2,57,93,437.50 among all its
employees across
the organization on condition that they
achieve the estimated annual revenue target
https://www.qualitydigest.com/jul/gainshre.ht
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13. • Of the incentive, 60% can be allotted to the
technical team, 20% to the marketing team
and to the other teams accordingly
( Design & IT (60%), Marketing (20%),
0perations (3%), Finance (11%) and HR (6%))
14. suggestion
• In addition, the technical team and the marketing
team can be divided into numerous smaller teams and
each such technical team should be tied up with the
smaller marketing team and they should be given
individual targets/tasks that they should strive to
achieve in sync with each other.
• Similarly, the finance, operations and HR teams could
be given specific responsibilities to provide support in
increasing the productivity of the technical and
marketing teams, thus compelling all the teams to
function in sync with each other to fulfil the
organizational goals.
15. Q1: There are various incentive plans that could be
used by Ray Tech Pvt. Ltd. (Ray Tech) for
incentivizing its team or across the organization
• Profit-sharing Plans: All or most employees receive a share of the firm’s annual
profits. There are two types of profit-sharing plans
– current profit-sharing and deferred profit-sharing plans
• Gain-sharing Plans: This plan too engages all employees of an organization in a
common effort to achieve company’s productivity objectives, but differs in terms of
its formula
• There are three types of Gain-sharing Plans –
– Scanlon Plan: It has five basic features – philosophy of cooperation, identity, competence,
involvement system and sharing of benefits formula – and Scanlon plan helps in achieving employee
commitment and cooperation to achieve common organizational goals and its formula divides payroll
expenses by total sales
– Rucker: Employer divides the value added for the period by total payroll expenses
– Lincoln: The company distributes total annual profits among employees based on their merit rating
– Improshare: The bonus depends on the difference between how many labor hours the company
should have used for the period, compared with how many it actually used
• At-Risk Pay Plans: Also called Variable Pay plans, put some portion of the
employee’s pay at risk, which is paid only when they meet or exceed their goals
16. What are ESOPs
• Employee Stock Ownership Plans (ESOPs):
They are company-wide plans in which
employer contributes shares of the company
stock to a trust established to purchase shares
of the firm’s stock for employees
18. SCALON PLAN
• Scanlon plans have five basic features. Such
as (1) philosophy of cooperation, (2) identity,
(3) competence, (4) involvement
system, and
(5) sharing of benefits formula
• A Scanlon plan focuses on
costs
• cost-saving,
productivity-incentive plan
reducing labour
gain-sharing,
19. canlon Plan(cont......
* Incentive rewards are paid to
employees on the basis of improvements in pre
established ratios.
Incentive =$ Labours cost / $ total sales value
The Scanlon plan is not a true profit-sharing plan,
because employees receive incentive
compensation for reducing labor costs, regardless
of whether the orpa nization ultimately
makes a profit.
