You are the Chief Supply Chain Officer of a global consumer goods company and you are restructuring the salary and incentives of your top direct reports, including your heads of procurement, logistics, risk management, and supplier compliance. The CEO has indicated that over the next five years your priorities (in order) are to cut costs by 10%, reduce the total number of suppliers by 5%, increase the spend going to smallholder farmers by 10% and decrease the environmental impact of your supply chain (as measured by a variety of indicators including carbon emissions, absolute volume of water drawn from at-risk water sources, etc.) by 25%, and has indicated that you could earn bonuses of up to 50% of your annual base salary for achieving these goals.
a. How might you structure incentives differently across the heads of procurement, logistics, risk management, and supplier compliance? Describe your rationale.
b. If you expect to have a $1 million pool of salary bonus to distribute across each of these four functions annually (i.e., procurement, logistics, risk management and supplier compliance), how might you start to allocate that money to align with your priorities? Describe your rationale.