WrapIt Up Write-Up, Case Study Example

Martha Reyes, the HR executive of the WrapItUp chain, with the help of an external consulting firm, developed the ShareIt program, a profit-sharing plan intended to make store manager compensation more competitive and to motivate managers to maximize individual store profits. In late July 2011, it had finished a six-month pilot in two carefully chosen outlets. Having received the final report from the consulting firm, Reyes needed to decide what to recommend to WrapItUp’s two founders, who still served as co-CEOs. She had, basically, four options; namely, i) to roll out the ShareIt program to all stores, ii) to run a larger trial, iii) to put the program on hiatus while it was being modified, and iii) to abandon it altogether.

The ShareIt program has some significant strengths. The first one addresses complaints that the volumes of the smaller establishments cannot compete with those of larger establishments. In the shareIt program, the field is levelled in that respect in that management compensation would be correlated to restaurant profits, not volume as in old plan. This makes it possible for the smaller restaurants to increase their profits as well. If the managers increase the restaurant’s profits to the extent that this is reflected in their pay, it will increase their self esteem and they will feel good about themselves (the third level of Maslow’s Hierarchy of Needs Theory) and go forward to the top of this hierarchy, the self-actualization level where a person tries to reach one’s potential. If this were to happen, it would be a nice increase of pay for the store manager and a good profit margin for the WrapItUp corporate. There now could even ensue a healthy competition between stores as to where they would rank in profitability increase. Not only is competition a good motivator, but if one is competing, one gets noticed—especially if one wins or even ranks second or third. If there were some special recognition built into the ShareIt plan for each year’s winners, it would be another big motivator as it was in the Hawthorne studies when the women in the studies, placed in a special room, performed better—not because of pay—but because they were noticed and felt special. Another good motivator in the ShareIt plan is that the “extra” pay would be paid one month after it was earned, thereby being more associated with the managers’ efforts and as a result being more incentive-based than the old plan where the payment amount was guaranteed every February first and guaranteed for an entire year resulting in a restaurant not being able to move between bands for an entire year. As a result, Reyes noticed that some restaurants did just enough to stay in their band/level.

A big weakness is that although managers might make more money and, consequently, have a reduced turnover rate, the crew turnover would not be reduced because the managers did not feel they could pay them more because if they did, their margins and paychecks go down. Another problem is that managers were working about 20 hours per week more than in the old plan and one of the two in the pilot plan said that she could not continue to do this forever.

This student believes that Reyes should roll out the ShareIt program to all stores improve upon it as indicated because time is of the essence since in the year prior to this pilot study the company spent its entire recruiting budget in the first quarters. Turnover must be reduced.