Bi-Rite is a retail store located in a major mid-western city. Bi-Rite is part of a regional chain of fine department stores. Because of its reputation, Bi-Rite has been able to attract highly competent professional sales help. All sales clerks are salaried employees who are well paid, but who do not receive commissions.

Recently sales have flattened out because of slower economic conditions. Thinking that maybe an extra incentive will help Bi-Rite through the economic dip, the store manager decided to institute a two percent commission oncash sales only. Because of the four percent service charge made by the bank charge card of the four percent service charge made by the bank charge card plan on all charge sales, Bi-Rite’s manager felt that this incentive plan would appeal to the sales clerks and be advantageous to the firm.

The manager was right – too right in fact. Some of the sales clerks have become so enthusiastic about getting their two percent that they are being very pushy and insulting to customers who refuse to pay cash and try to use a bank charge card. Consequently, the manager has received several complaints in the last few days from irate customers who loudly promise to “never shop here again”.

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  1. Evaluate the use of this type of incentive and why the manager is experiencing problems with it.
  2. If an incentive system were to be used, what type of system would you recommend? Why?

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