Attached is a case analysis of the Marshall and Gordon case. This case analysis is a memo that is addressed to the CEO of the company. The memo is written by the executive assistant to the CEO. Please help me write an executive summary(5-6sentences long) and a conclusion paragraph(5-6 sentences long) summarizing the material contained the case, along with the executive assistant's final decision/recommendation to the CEO. Please insert the executive summary on Page 3 of the document, and the conclusion at the end of Page 7, right before the exhibits. All the information you need to write the ex. summary and conclusion is contained in the attached document.

Marshall & Gordon: Designing an Effective Compensation System (A) ACC 675 Case Analysis Timothy Ali Julius Lostal December 4, 2013 Table of Contents Executive Summary............................................................................................................... .................................1 Case Analysis.............................................................................................................................2-6 Exhibits.................................................................................................................. ...................................................7 Works Cited........................................................................................................................ .....................................8 Executive Summary 'More' is not necessarily better: this is not only true for PR itself, but also applies to soliciting PR projects. At present, at our firm, partners, and principals are compensated through salaries and annual bonuses based upon projects they have 'originated' and 'executed'. As a result, salaries vary widely. There exists subjective bias in terms of how these bonuses are calculated, as partners often negotiate bonus splits by allocating 'o' and 'e' credits. Salaries are tied to bonuses and often double based upon the credits accrued by the employee. This rewards competitive, high-achieving performers. However, tension exists when rewarding 'origination' in the same fashion as 'execution'. This naturally causes employees to focus more on the quantity of projects generated, rather than the quality of the projects. In an increasingly crowded information marketplace, our firm must strive to remain unique. The easiest way to accomplish this task is by crafting PR campaigns that make us unique in comparison to our competitors and creating a stable of clientele that results in the branding of our firm. There is no such thing as a perfect compensation plan, but there are fundamental characteristics unique to creating a good one. The purpose of a compensation plan is two-fold: to assist a company in accomplishing its strategic goals, and to attract, reward, and retain the necessary individuals. If the compensation plan fails to accomplish these two general objectives, it must be immediately modified. An effective employee compensation plan is composed of 8 items: (1) a statement of overall objectives, (2) the relative importance of compensation, (3) performance measures, (4) competitive reference points, (5) competitive positioning, (6) internal equity and consistency, (7) communication and involvement of employees, and (8) governance. (Exhibit A). It is critical that we have a statement of overall objectives - a plan that clearly and meticulously explains the manner in which the rewards will be given - each reward given will serve a distinct role, and it will have a cumulative effect on the business, employees, shareholders, and their current and/or prospective customers. There is no evidence of a clear and definitive statement of overall objectives but simply an inherent understanding (completely unique and subjective to this particular firm) by its employees that the transition from the associate level to the partner level will take place in 7 to 10 years (i.e. an associate will become a senior associate in 2 to 3 years; a senior associate will become a principal in 5 to 6 years; and a principal will become a partner in 3 to 6 years) based on the amount of revenues billed and/or the number of both short-term and long-term relationships established with prospective clients. It is also imperative to note the manner in which 'credit' is defined by our firm: projects are 'double-counted' for both origination and execution (o/e), in which the partner responsible for originating the project is given 100% credit and the partner who executes or completes it is given 100% credit too. However, this manner of distributing 'credits' doesn't work effectively when talented individuals who are brought in to network and interact at the highest levels in corporate and public life (i.e. CEOs, stakeholders who care about their CEO, Wall Street analysts, activist shareholders, politicians, etc.) are conducting business they were handling prior to joining our firm; they are not responsible for mentoring any of our current associates and they don't need to worry about attaining any numbers (by not having to worry about this aspect of their job, there is no apparent effect on their bonuses, which will not be evaluated for a few years). As a result, our current employees are excluded from receiving either 'origination' or 'execution' credits. It is also important to note that this system fails to consider those employees, as in the case of Janice Lu, our San Francisco-based partner who is responsible for dealing with our biotechnology clients under the firm's Healthcare practice and serving as the managing director for the firm's North America-West region, who take on the burden of an abundant amount of responsibilities and are not adequately compensated for them. Therefore, the manner in which each employee is given credit for undertaking some part of the project blurs the defined role of the given reward; it provides no form of incentive or motivation for the person 'originating' the project to see it to its completion and it deceptively motivates the person responsible for 'executing' the project (i.e. the individual responsible for executing the project may not be interested in the project itself or what it entails; he or she may only be motivated in executing it in order to be compensated for their time and effort). Our system is inefficient in the sense that it fosters and promotes individual performance, not collaboration; instead of splitting the fees or sharing the pie, it is destructive, and it encourages greed. Our firm culture has become increasingly atomized. Non-consulting employees and other support personnel do not receive bonuses, so, depending on the generosity of the employee whom they work for, he or she might write bonus checks for them out of his or her own salary. This once again fosters resentment rather than a cohesive organizational dynamic among firm employees. As the firm looks to expand its services by building upon its burgeoning executive positioning practice (EPP) and by offering a more differentiated product through expanding its services, having a distinct vision as a company and a united vision among all employees is all the more critical (\"Porter's Five Forces,\" Knowledge-sharing tools). Refer to Exhibit B for a visual representation of the Porter's Five Forces Model. Our established compensation plan must clearly and definitively explain how rewards are to be given to our employees; the manner in which rewards are to be given to our employees must be directly correlated and/or linked to company identifiers such as technology, culture, size, or leadership (these identifiers are directly proportional to our perceived reputation both on an internal and an external level). Moreover, our compensation plan must clearly establish and outline competitive reference points in which our reward package is compared to our competitors in both our industry and geographical region (this permits us to establish a benchmark). Performance measures are essential in classifying and outlining the specific performance criteria to be rewarded and describing the appropriate measurement levels. It should make it very clear the manner in which rewards will instigate and/or motivate employee actions. In our case, the only measure driving employee actions is the double-counting of origination credits and execution credits. This is inefficient because it fosters a narrow-minded view of 'properly' or 'adequately' rewarding our employees for their contributions; employees are more concerned with the amount of money they will make for each project and are reluctant to commit to mentoring or training junior consultants because they truly fear that the junior consultant(s) will adamantly request a portion of their 'execution' fees (our employees feel that this concern is necessary to express to management because they want to know what fee credit they will get for doing non-client-related tasks). Dispensing with our bonus-based compensation system might be problematic, since the public relations industry is largely structured around the expectation that employees will earn the majority of their income through bonuses. At the same time, the current system is cumbersome to implement and does not necessarily reward the best performers, merely those who generate the most clients. Further, the ways in which workers 'game' our system (such as the tendency of workers to agree to split credits) makes it all the more difficult to structure fair compensation. In terms of motivating employees, our bonus system is problematic due its opaque nature. This may act as a disincentive to perform to a high standard, given that employees are unclear as to how they will be compensated in comparison to their fellow employees. The allocation of bonuses is based upon a tiered system, and the greater the credits the employee earns, the higher the bonus the employee receives. This is designed to stimulate productivity and competition. Our system lacks transparency, and due to the complex, multi-tiered system, there is often a perception of inconsistency and arbitrary allocation of such bonuses (\"8 components of an effective employee compensation plan,\" HR). 'Execution' credits are the same as 'origination' credits, and while there are additional bonuses that are rewarded based upon excellent performance, employees have complained that they are uncertain how this allocation is determined and say these 10 percent 'quality' bonuses are given in an arbitrary fashion. In order to rectify this matter, developing proper performance measures should take the following points into consideration: Replace subjective performance measures with objective performance measures. The traditional way of reviewing or appraising employees is purely subjective and individualistic, as it is solely based and reliant on a supervisor's evaluations of an employee's day-to-day, ongoing performance rather than objective results. These subjective evaluations are entirely based on nonperformance factors such as employee 'likeability', 'employee 'busyness', individual prejudices, ease of management, conformance, previous mistakes or successes, and so forth. Simply paying an employee for 'cooperating' or following company regulations is a disservice and it doesn't directly result in verifiable, tangible business results. Refer to Exhibit D for a chart depicting examples of employee satisfaction tools. Replace bonuses with pay for performance. Bonuses are 'after-the-fact' discretionary payments to employees for adequately completing the task assigned to them. It is important to stress that there is no apparent wrongdoing for carrying out this particular measure, but it is necessary to understand that it doesn't lead to directly improving or sustaining employee performance due to the fact that the employee is not made aware of this form of payment in advance. Therefore, the only way this measure would work as intended would be if the employee was 'clairvoyant'. Replace annual performance measurement with more frequent measurement. It is impossible for a supervisor to adequately rate an employee's past performance without any concrete or substantial data at their disposal and then require he or she to incorporate this incomplete analysis in order to determine an employee's expected or anticipated performance over a range of two hundred and fifty workdays. It is important to understand that performance measurement is exclusively based and dependent on objective, not subjective data; it is a must to provide constructive criticism to employees at the minimum, on a monthly basis. Replace large group measures with small team and personal performance measures. Profit sharing and gain sharing plans are exclusively dependent on a large group of people, not just on an individual. Undertaking this type of approach is erroneous for a couple of reasons: (1) the employee is normally incapable of influencing the final outcome and (2) the payment is determined by the performances of more than one individual, usually hundreds or thousands of employees. Therefore, the payment becomes uncertain and it is in no way related to an individual performance. Replace broad financial measures with actionable measures. It is erroneous to evaluate or pay an employee for results he or she didn't affect on an individual basis. Pay for performance plans that reward employees for broad financial outcomes (return on equity, return on assets, return to stockholders, etc.) are simply and logically paying for organizational performance, not employee performance. When designing a pay for performance plan we should always ask, "How can the employee directly improve this measure's results through a change in personal behavior?" Replace unbalanced performance measurement plans with balanced plans. One dimensional performance pay plans are inefficient and result in unanticipated outcomes. Once a performance measure has been established, the next step is to determine the negative impact it could possibly have on the end result. If the impact is deemed to be likely, the possible outcome must be both accurately and definitively measured, where it is to be incorporated in the measurement plan. Replace discretionary pay for performance plans with rule driven plans. A viable pay for performance program must be both reliable and predictable. Do not be tempted to constantly change the program requirements and parameters. Employees will not invest time and effort in a program in which the measures, criteria, and pay potential change frequently and unpredictably. Refer to Exhibit C for a visual depiction of effective compensation planning techniques. The shift in the focus of our firm from offering multiple services beyond that of standard PR suggests that we are attempting to market our product based upon the 'relationships' we wish to generate with our clients, as opposed to obtaining as many projects as possible. Focusing on creating relationships also better ensures return traffic, and having a stable base of clients creates the perception of a firm that offers something 'special' in the field of PR. At the same time, our firm must make it clear to our employees that we are not simply looking for additional clients on our roster: we want clients that we can rely on, clients that will return to the firm, and we want employees to invest time in clients to ensure projects are well structured from beginning to end. At the end of the day, the best way to reform the compensation system is to simplify it: eliminate the 'tiered' system and merely allocate bonuses based upon originating and bringing a project to completion. Furthermore, employees who initiate projects should receive greater compensation than those employees who implement the projects. Bonuses for excellence should cease, since there is no proof that they are truly leading to higher levels of performance. Exhibits Exhibit A: 8 Components of an Effective Employee Compensation Plan Statement of overall objectives Relative importance of compensation Performance measures Competitive reference points Competitive positioning Internal equity and consistency Communication and involvement of employees Governance Exhibit B: Porter's 5 Forces Exhibit C: Compensation Planning Exhibit D: Employee Evaluation Process Works Cited \"8 components of an effective employee compensation plan.\" HR. Web. 2 Dec 2013. HR. http://hr.blr.com/HR-news/Compensation/Compensation-Administration/zn-8components-effective-employee-compensation-pl \"Marshal and Gordon Case Study.\" HBS. 12 Mar 2013. Aquila, August, and Coral Rice. "Effective and Not-so-Effective Compensation Systems." Effective and Not-so-Effective Compensation Systems. N.p., n.d. Web. 20 Nov. 2013. \"Porter's Five Forces.\" Knowledge-sharing tools. HR. Web. 2 Dec 2013. http://www.kstoolkit.org/Porter%27s+Five+Forces+Analysis