Ten years ago, Alex Chin started up successful sports supply business called Pro-Am Superior Sporting Goods. The business offers a wide range of supplies for a variety of sports, Their primary customers are retailers of sporting goods across the country, and they have recently expanded into the growing golf market. Alex and his team started out selling products produced in North America, but in the last four years, they have found excellent suppliers in Asia at a fraction of the cost. Their profit has made big jumps since then, as the stores who are their customers are still paying the same price to Alex for the imported product. In total, Alex has 15 employees who support this busy importing, shipping, and sales operations.

Alex believes in creating a workplace where people see a career for themselves. He prides himself on paying fairly and leading a workplace where people will work hard, collaborate with their coworkers, and enjoy the work they do as much as is possible.

When the Pro-Am Superior Sporting Goods profits began to really soar, Alex started a practice of paying a Profit Sharing Bonus to his employees involved in front-line sales, since they played such a key role in growing his business. Until this year, there have been three sales employees, who are a close-knit and friendly group. The bonus would work this way. Alex would announce the total bonus amount each year, and his three sales employees would share it equally. Last year, they each received $12,000 for a bonus at year end, over and above their salaries. (Salaries range from $55,000 to $71,000). The three sales employees enjoy working hard to sell great sports products. Repeat business and word of mouth referrals are very high. They are kept very busy to stay on top of the calls, emails, and online inquiries. The salespeople have been thrilled with the growth in company results, and they feel fortunate to share in the profits. Alex recognizes the importance of making his sales employees feel appreciated, and it has paid off.

In the past year, as sales and customers continued to grow, Alex hired one more sales employee. Derek Johnson is an avid golfer, and it seems he has contacts everywhere. In the short time he has been with Pro-Am, he has reached out to golf courses to start stocking Pro-Am products in their pro shops. He has a large network of friends who spend a lot of money on clubs and accessories, and they are now buying directly from Pro-Am, initiating a new venture in direct sales, Alex is pleased with Dereks amazing results. He is getting almost 60% more sales than any of the three more experienced sales employees.

Derek clearly does not put the same priority on working well with his peers as a team player. He is not always in the office. He says you have to visit places all the time if you expect to sell them. The other three sales employees know that Alex expects them to ensure there will be at least two people for coverage in the office almost every day. This is how theyve always operated. The practice had been for sales employees to share the calls and online orders fairly as they come in, making sure to help each others clients if necessary. They take turns when a cold call request comes in, so they each get equal opportunities. When Derek is in the office, he focuses only on his own sales rather than supporting any of the other three employees when busy. He can be abrasive too, joking that they are not going to get very far in life if they dont work smarter and saying its a dog-eat- dog world out there. One of his favourite expressions is, I have to take care of Number One. No one else is going be looking after me.

Now its bonus time. Profits have jumped substantially in the past year, and next week Alex is expected to take everyone in sales out for dinner and announce the bonus. In the lunchroom before opening one morning, the three original sales employees are chatting. One roughly calculates the bonus this year could well be $60,000 in total, instead of $36,000 like the year before. The longest serving sales employee says how great it will be when they each get $15,000, although another of the three wonders if Alex will really be that generous. You know, he could keep it for himself any time he chooses. Each year we are fortunate he cares enough to keep on with the great profit sharing. Derek was making himself a coffee across the lunchroom. He listened, then said, Alex better pay! Im counting on it. Not only that, but I expect Ill get at least $30,000 of the bonus this year. You guys will be lucky to get $10,000 each. Im clearly the top sales guy here, and if Alex is smart, hell be rewarding the one who is driving his profits.

Case #1 - Consider:

What are the key issues with the sales team here?

What options might Pro-Am Superior Sporting Goods consider in how to determine and communicate bonuses? What do you recommend?