David

Li, 22382
Course 632 Seminar 7

Seminar Assignment 7
Assignment 1

A,
The compensaiton plan for the financial consultants of PCSD consists mainly of 3
parts

Deferred compensaiton plan (PCSD award) : A reward based on the gross

revenue earned by each individual consultant with a minimum requirement of
200 000$, the reward consists of 3 parts, a base award, a recurring revenue
award and an award for the growth rate of revenue.
Gross production compensation plan.
o A commission-based compensation earned by each individual
consultant depending in how much revenue they generated each monh.
The compensation also variates and depends on the the time horizon
the consultants have been with the firm as well as what type of
business the consultant brings in.
Expense account award
o If the consultant has managed to generate a minimum revenue of 500
000$ during the previous year, they are awarded an expense account
allowance to further handle their business needs. These allowances
cant be carried onto next year.

B)
Positives

The compensation is related to how well each individual consultants

performance during the year, thus motivating them to perform well every
year.
This also eliminates the issue of free-riding

Negatives

The different hurdle rates for new employees compared to more senior ones
may make the old ones feel that they are treated unfairly.
The hurdle rates also affects the top senior performers, forcing them to bring
in more business in order to achieve a bonus even though they in absolute
terms might be bringing in more business.
All compensation are financially based with no non-financial compensation,
this doesnt really promote long-term thinking of staying at the company.
Only focusing on extrinsic rewards, no intrinsic rewards/motivations
implemented.

David Li, 22382

Course 632 Seminar 7

c)
When it comes the financial compensation, I believe the system for the commission
hurdle rates should be changed. A possible solution could be to give the employees
that have stayed with the firm longer a larger variable compensation in relation to
their fixed pay and vice versa for the newer employees.
I recommend PCSD to not only focus on the extrinsic reward but more emphasis on
the intrinsic motivation. This could be achieved through more team oriented
activities and involvements in order to make everyone feel like they are a part of
something creating pride and joy.
Furthermore, it is important to provide exceptional customer service in a business
like wealth management. PCSD should consider lower the requirements for the
expense account allowance in order to let new top perforing consultants to quicly
advance themselves and provide exceptional client service.

Assignment 2
It is crucial to set the right performance management standards in order for the
company to succeed. If the standards are too low it might limit the employees as the
goals are easily reached and doesnt encourage further advancement, however, if the
goals appear to be too hard it might demotivate the employees. Therefore the targets
should be realistically set, however this is easier said in theory than executed in
practice. A good target should be set through negotiations and discussions between
the managers and employees rather than a one-way-discussion / standardized
process.