20/04/2023
Veljko Petkovic
z5360072
ACCT2522 Topic 8 Homework
Question 1
1. Suggest an incentive scheme for the claims examiners that will address both Cat’s
and Sam’s concerns. Use principles of agency, goal setting, and expectancy theories
to inform your answer (note: you do not need to refer to every part of every theory).
According to agency theory, when proposing an incentive scheme, it is important to ensure
that the goals of the workers are aligned with the goals of the organisation. Otherwise, the
organisation risks dysfunctional behaviour.
A potential incentive scheme that the organisation can employ for claim examiners is a bonus
directly related to the number of claims processed correctly. For example, once a claim
examiner reaches 5000 correctly examined claims, they could be rewarded with a 5% bonus,
once 6000 claims are reached a 7.5% bonus is given etc. These numbers are just used as an
example, but it vital to ensure that the numbers selected are realistic and attainable.
Excessively high standards may have a counter effect on employee motivation.
This incentive scheme will externally motivate employees to examine claims quickly and
accurately. This will address Cat’s concerns of wanting more claims to be examined per day,
and Sam’s concerns to ensure they that are being processed accurately.
2. Provide one (1) efficiency and one (1) effectiveness measure that you would use to
help you assess how well the plan you suggested in (A) works, and explain why you
have chosen them.
Efficiency: Number of claims examined per day for the month of May vs April.
Effectiveness: Proportion of claims examined correctly for the month of May vs April.
If the new plan is imposed as of May, then comparing these two metrics in April and May
will reveal to the organisation whether the plan worked, as we expect improvement in the
month of May as a result of increased employee motivation.
Question 2
1. Based on your understanding of intrinsic motivation and extrinsic motivation, draw
on case information to explain why Myer Sisters’ employees are not motivated to
perform at a high level.
Agency theory perhaps reveals the reasons why employees are not motivated to perform at a
high level. Grace’s goals of expansion, most likely to not align with employees’ goals, who
most likely are only concerned with the happenings of the store they work at. Thus, Grace
may be creating a competitive and intense workplace, from which employees stand to gain
nothing from. This may be the reason why they are willing to take a pay-cut to work
elsewhere.
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20/04/2023
Veljko Petkovic
z5360072
2. Do you think this gain sharing plan is a good idea? Support your answer using
agency, goal setting and expectancy theories as appropriate (i.e., you do not need to
refer to every part of every theory).
Yes, I believe that gain sharing is one of the best ways to improve employee motivation. As
agency theory suggests, it is paramount that the goals of employees and the organisation as a
whole are well aligned. Otherwise, there may be instances of dysfunctional behaviour which
would lead to poor outcomes for every party. By aligning employees’ compensation with
their performance, it aligns their goals quite well with Grace’s.
However, it is important that when setting milestones for employees to attain, that these
milestones are reasonable and attainable. Otherwise, gain sharing will have the opposite
effect as employees will not be motivated to try at all since, they believe that they will not be
able to achieve the milestone.
3. Based on your understanding of the various principles of incentive
system/performance evaluation system design, make three suggestions as to how
Myer Sisters’ performance measurement / incentive system can be improved.
1. Grace could implement incentive to improve the customer service of employees and thus
reduce the amount of customer complaints by, rewarding the team
parties/dinners/celebratory events/lunches etc. This would align the goals of the team with
Grace’s goals and would motivate them to exhibit better customer service. Likewise, this
measure aligns well with employee performance.
2. As referenced earlier, Grace could implement gain sharing incentives. For example, if
Grace can achieve her expansion plans within her desired time frame, then she could
reward her employees who helped her achieve this with rewards such as bonuses or
vacation days etc.
3. Another instance of goal sharing that grace could implement would be to tie together
employee compensation with sales per square meter. Thus, this would motivate
employees to ensure that the store is clean, stock is well displayed etc which should result
in better sales.
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