LearnInMotion.com
Pay-for-Performance and
Financial Incentives
Ellie Rideout, Nikki Reilly, Dylan Roth
● Offer continuing education-type business
courses
● Employees include Jennifer and Pierre, a web
designer, a content manager, and ~7 more
employees
● Venture capitalist firm that funded LIM
outlined their employee incentive plan
○ 10% of stock reserved for employee
incentives
Running Case
Running Case
1. Employees get stock options at a price 15% less
than the venture capital firm paid for those shares
when LIM was funded
4. Must exercise stock options within 90 days of
leaving the company
2. Vesting schedule of 36 months (⅓ shares vesting
after 12 months, ⅓ after each of the following two
full 12-month periods of employment.
3. Not eligible for stock options if employee leaves
during first 12 months
5. Number of stock options determined by Jennifer
and Pierre based on what they think the employee
brings to the company
Running Case
Running Case
● Employee first receives letter of the offer with
minimal details
Additional incentive plan for the two
salespeople
● Base salary (one paid $50,000; one paid
$35,000)
● After 90-day introductory period, receives 5
page document describing the plan that the
employee, Jennifer and Pierre all sign
● In addition salespeople receive 20% of any
sales (advertising, course listing fees)
Question 1
Question 1
Is LearnInMotion’s current compensation
program motivating their staff? Or is it
hindering employee performance?
● Incentive plan (stock option) is complex and not
effectively motivating employee performance
● Base Salary and 20% commision is also not
driving performance for sales
● Could be hindering salespeople’s performance as
they can always fall back on base salary and may
not be focusing on customer service
Question 2
Question 2
Should LearnInMotion use a mix of individual,
team, and organizational incentives? If so,
recommend specific incentives that the company
should use and discuss why you recommend each.
● Individual incentives are a way to motivate
employees by giving them the opportunity to earn
additional income
● Team/group incentives are similar to individual
incentives except a group/team of individuals receives
incentives
● Organizational incentives plans are rewards based
on performance of the entire organization
Question 2
Question 2
● Individual incentives might show preferential
treatment among small number of employees
Organization-Wide Incentives
● Profit Sharing
● Gain Sharing
✓Employee stock ownership plan
● Small amount of employees means there aren’t
many team/group situations or projects
● Organization-wide incentives are the best
option for the company currently and as it
grows
● best applies to LIM’s changing business and range of
employees
● continue to apply as the company grows
Question 3
Do you think changing the compensation
strategy will positively affect this firm? If so,
how specifically?
Question 3
Change or Keep the Stock Option Plan?
Pro’s
● Stock option is unclear and confusing for
employees
● Stock options are unfairly determined by Jennifer
and Pierre
● Current stock option plan does not have
immediate vesting
● If value of the stock drops, employees suffer
Question 3
Question 3
Cons
Keep Employee Stock Ownership Plan
● Stock option plan best applies to LIM’s business
and range of employees (ex. gainsharing not
effective in changing industry)
● Changing the plan is difficult as it was set out by
venture capitalist firm
● Long-term plan entices employees to stay with
LIM and reap the benefits
LIM should focus on better communicating the
stock-option plan and determine an unbiased
amount of stock options for each employee.
Question 3
Conclusion
Change salespeople incentive plan
● Salespeople are used to having a base salary,
changing that could worry employees
● Current compensation plan is not effectively
motivating employees
● Get rid of 20% commission on all sales as it is not
an effective incentive
○ Apply commission only for premium products
○ bonuses for positive customer service feedback
● Salespeople still benefit from stock-option plan
Questions?
● Organizational focus (easy to apply to a range of
employees)
● Keep stock option plan, but better communicate
to effectively motivate employees
● Employee recognition, compliment and motivate