Carla Wright had been working for a cleaning company for two years that specialized in office cleaning. The company was small and had only five employees. Carla was the top performer, yet she was paid the same as the other employees, so she decided to start her own company.After checking to ensure that there weren't any other companies with the same name, she started Clean it Wright as a C Corporation (C-Corp). Clean it Wright specializes in commercial cleaning of office buildings. Carla has a two-year degree in accounting but had no education or experience in owing a company or managing employees.

For the first year, Carla had 22 office cleaning contracts and hired 12 employees. During the first year, she managed all of the employees and at the end of the year, she gave each employee a $500.00 bonus. Although they were happy to receive a bonus, Carla had not mentioned this when she hired them, nor had she done any type of performance review during the year. Carla started receiving complaints that others were working less, yet they received the same bonus. One employee shared that her previous employer used a pay-for-performance system.

Carla did some research on different plans and agreed to set up a plan that would give a bonus incentive to the team that achieved the highest performance for the year. At the end of the first quarter, Carla realized that this plan was also not working well. By the end of the first year, she had hired 30 new employees.

She realized that she needed more knowledge on how pay-for-performance plans work. Carla took some business classes and hired a consultant to give suggestions on how Clean it Wright could set up a pay-for-performance plan that would work well financially for the company and also for the employees. One thing Carla insisted on was that she maintain complete control of the company. As a result, Carla started a merit bonus system.

1. When Carla set up the bonus incentive plan for the best performing team, which criteria below could have been used to make it fair and objective?

A. Carla's inspection of every office for the first quarter

B. Time spent cleaning each office

C. Feedback from the business on the team's cleaning quality

D. Money spent on cleaning supplies

E. Employee turnover

2. Why do you think Carla initially chose a merit bonus instead of a merit pay plan?

A. It is easy to administer because it becomes part of the base salary forever.

B. It must be re-earned each year.

C. Carla likes to give bonuses to her employees because they help the company succeed.

D. It does not have to be re-earned each year.

E. It becomes part of the base salary but must be re-earned each year.

3. Which plan do you think will best suit Carla's needs now that she has over 30 employees?

A. Employee ownership through stock options

B. Merit pay plan

C. Gainsharing

D. Employee stock ownership plans (ESOPs)

E. Profit sharing

4. If Carla decides that maintaining complete control of the company is no longer important to her and wants to give employees ownership in exchange for performance, which plan would be the most beneficial to the employees?

A. Employee ownership through stock options

B. Employee stock ownership plans (ESOPs)

C. Merit pay plan

D. Profit sharing

E. Gainsharing

5. If Carla decides that maintaining complete control of the company is no longer important to her and wants to give employees ownership in the company, which plan would be financially risky for the employees, but one of the best options for Clean it Wright?

A. Merit pay plan

B. Employee ownership through stock options

C. Merit bonus plan

D. Employee stock ownership plans (ESOPs)

E. Gainsharing