Evaluation of salary plan based on incentives, straight salaries, commission system and performance evaluations.
Leisure-Time boats is a manufacturer of mid-to-high end boats with 12 sales territories throughout the U.S. Sales are generated by salespeople in each territory who develop relationships with boating distributors and related retailers. At the same point of time history has shown that the firm's sales and profitability vary significantly from year to year depends on general economic conditions. As president of the company you are aware that good salespeople are an important part of your success. You are considering implementing an incentive compensation plan to replace the straight salary plan used to date. You have contemplated a straight commission system based on an objective valuation of sales, as well as a subjective plan which utilizes periodic performance evaluations. Given your choices (salary, straight commission, or a subjectivelan) which do you choose? What are the pros and cons of your choice?