Subject: Human Resource Management

Professor: PAVAN KUMAR BALIVADA

Date of Submission: 10-FEB-2019

Assignment

Section C

GROUP- 2

Bhargesh Patel - 18A2HP402

Rishabh Nahata - 18A1HP046
Aindrila - 18A1HP017
Jatin Singhal - 18A1HP078
Namanya Singh - 18A1HP072
Himanshu Shekhar - 18A1HP055
Assignment Solutions:

1. Review the relationship of Arck and Lux Software’s compensation plans.

Ans: The relationship between Arck system and Lux Software’s compensation plan is as follows:

 At Lux computers, the top Sales representative i.e. in first percentile of pay made 30
times more than the average salesperson but were only 14 times more productive,
whereas at Arck system, the top salesperson gets 4 to 5 times more pay than average and
were 4 to 5 times productive.

 At Lux computers, employees were given an accelerator as an incentive and at Arck

system they had cap pay and bonus pay.

 The compensation plan of both the companies had some similar components, i.e.
Base pay
Quota
Sales commission

 Both companies followed ‘Performance based’ Compensation plan.

 Sales reps of both the companies received their commission on the completion of their
designated quota.
 Along with the monetary benefits, both the companies used to provide non-monetary
benefits to their Sales club such as, paid vacation to Foreign countries like Hawaii and
Bahamas.

 Special recognition in the form of ‘Gold star’ were given to top sales reps in both the
companies.

2. There are different compensation plans for two companies discussed in the case. Which of
these differences should most concern Bryan Mynor?
Ans:
Plan element Lux Software Arck
Base Pay 32,000 per year 65,000 per year
 Quota 100,000 per quarter 1,000,000 per year

Sales Commission 4% base commission 9% base commission

(paid after quota is
met) 2x accelerator (8% commission) No accelerator
for quarterly sales between
300,000 and 600,000

3x accelerator (12% commission)

for quarterly sales between
600,000 and 1,000,000

4x accelerator (16% commission)

for quarterly sales between
1,000,000 and 2,000,000

6x accelerator (24% commission)

for quarterly sales above
2,000,000

Cap None 6,000,000 in sales per year

Other None 50,000 bonuses for reaching

Bonus 6,000,000 in annual sales

So, for Lux Software when Sales / year is 6,000,000, then Base pay is 32,000 and
Sales Commission (after quota is met i.e. 100,000) for 5,600,000 sales which falls in
4x accelerator (16% commission) i.e. between 4,000,000 and 8,000,000 sales per year is
(5,600,000 - 4,000,000) *0.16 = 256,000
For 3x accelerator (12% commission) i.e. between 2,400,000 and 4,000,000 sales per year as it’s also
included in sales of 5,600,000 is (4,000,000 - 2,400,000) *0.12 = 192,000
For 2x accelerator (8% commission) i.e. between 1,200,000 and 2,400,000 sales per year as it’s also
included in sales of 5,600,000 is (2,400,000 - 1,200,000) *0.08 = 96,000
So, total compensation will be 32,000 + 256,000 + 192,000 + 96,000 = 576,000.

And for Arck System when Sales / year is 6,000,000, then Base pay is 65,000 and
Sales Commission (after quota is met i.e. 1,000,000) for 5,000,000 sales is 9% base commission
i.e. 5,000,000 * 0.09 = 450,000 and 50,000 bonuses for reaching 6,000,000 in annual sales.
So, total compensation will be 65,000 + 450,000 + 50,000 = 565,000.

Here clearly the Top guns of Lux Software are the outliers and should most concern Bryan Mynor.