Post Graduate Programme in Management

INDIVIDUAL ASSIGNMENT 2

Henry Tam and the MGI Team

27TH FEB-2015

SUBJECT WAC
TERM III
Prof. Abha Chatterjee

Submitted by

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EXECUTIVE SUMMARY

WrapItUp is a chain of restaurants founded by Shawn Jackson and Simon Sethi while they were
graduating in Northern California in 2002. Competitive advantage of WrapItUp over other restaurants
included freshness of its ingredients which were locally sourced and accommodation of special diets in
its menu. Inspite of all these differentiating factors, WrapItUp was experiencing a high turnover and was
finding it difficult to attract and retain top talent. Also the motivation among store managers was seen
low due to low compensation. Martha Reyes, HR lead developed a ShareIt program in collaboration with
an external consulting firm in order to improve compensation plan of the firm and implemented it in
two stores of WrapItUp (Santa Monica restaurant and Costa Mesa restaurant) on a 6 month trial basis.
After 6 months, she observed that the program had achieved its stated goal of increasing the
profitability and managers compensation but was not fully convinced with the program. She doubted if
she should keep the program as it was and roll it out to all stores or should run a larger trial or modify
the program or abandon it. Based on our analysis of the situation we recommend that the program
should be temporarily stopped and modified before further implementation.

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Table of Contents

Sr. No.

Title

Page no.

1.

Executive Summary

2.

Situational Analysis

3.

Problem Statement

4.

Options

5.

Criteria for evaluation

6.

Evaluation of alternatives

7.

Recommendation

SITUATIONAL ANALYSIS

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WrapItUp, a chain of restaurants is plagued by the problem of high turnover and inability to attract and
retain top talent, especially at the store manager level. During the exit interviews it was found that low
compensation was the top reason for high attrition rate. Compensation plan of the firm was ineffective
as it was based on volume rather than profit. The sales level were grouped into five bands, and
managers of all stores in each category received the same adjustment whether they just barely made it
into the band or were at the top of the range. The plan was not really incentive-based. Customers loved
the dietary accommodations and community involvement offered by WrapItUp but did not like the long
lines and tired menus. Also regular customers were not being offered any discount and they wanted
to feel appreciated. Apart from this, firms commitment to local sourcing caused constant operational
challenges.

PROBLEM STATEMENT
What should Martha Reyes suggest Jackson and Sethi about the implementation of ShareIt program ?

OPTIONS

Keep ShareIt program as it was and roll it out to all the stores
Obtain additional data by running a larger trial
Temporarily stop the program and modify it
Abandon the program

CRITERIA FOR EVALUATION

Impact on attrition rate

Impact on profitability of the store
Impact on customer satisfaction ( results of Internet based Customer Surveys)

EVALUATION OF OPTIONS
Keep ShareIt program as it was and roll it out to all the stores
The program resulted in increase in average weekly pay of store manager as well as associate manger.
The weekly pay of store mangers increased by 77% and was now 45% above industry average. The
corresponding numbers for the associates are 30% and 3.4%.
The program would reduce the attrition rate of the store mangers but would not have any effect or
worse could even effect the attrition rate of associate managers adversely. It is so in the case of
associate managers because their working hours have increased considerably but their wage is just 3.4
% above the industry average.
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In the short run it is evident that the profitability of both the stores has increased but the data provided
is not sufficient to comment on the long term behavior of this trend.
The customer satisfaction of the Santa Monica store has increased (from 3.97 to 4.29,exhibit 4) which
was a bit intuitive as they started focusing on innovation to improve customer satisfaction to improve
sales. But on the other hand the Costa Mesa store started focusing on cost cutting to improve store
profits which resulted in the decrease of customer satisfaction from 4.0 to 3.71. (exhibit 4). Thus we can
conclude that the compensation plan is not very accurately linked to the organization goal of customer
satisfaction and the levels of customer satisfaction may vary depending on the path that the store
manager chooses.
Obtain additional data by running a larger trial
As we have seen in the evaluation of option 1 there are some flaws with the current plan that are somewhat intuitive as well so it makes no sense to carry on further trials without working on those flaws as it
will be a complete waste of time as well as money.
Temporarily stop the program and modify it
If we chose this option then we can spend some time to list down the goals of our firm-wrapitup- if it is
customer satisfaction or maximizing sales or maximizing profits or maximizing market-share a
combination of these. As our organization is growing it will be extremely difficult for Jackson and Sethi
to micromanage the firm operations. So they need to spend some time to clearly articulate goals of the
firm on which the store managers should act upon. Only after this has been done the program Share it
should be modified keeping in mind the organizational goals and long term strategy. There is also a
scope of redistribution of profits between the store managers and the associates because the benefits
of the profit should go to both the store managers and the associates.
Abandon the program
This will have no effect on the current standing of the firm in terms of Attrition rates of employees, the
profitability and the customer satisfaction

RECOMMENDATION
In the short run
Profitability
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Attrition Rates

Customer Satisfaction

Roll out to all stores

Conduct more trials

Stop and Modify

Abandon

Increase

Decrease for managers May

increase
or
but may not have much decrease based on
impact on associates
strategy pursued by
manager
No additional useful No additional useful Can give further insights
data will be found
data will be found
into the ling between
strategy
of
store
managers and customer
satisfaction
Increase
Decrease
Will Improve
No change
No change
No change

In the Long run

Roll out to all stores

Conduct more trials

Stop and Modify

Abandon

Profitability
Increase/Decrease
(because
it
also
depends on brand
image for which they
are currently charging
premium)
No additional useful
data will be found

Increase
No change

Attrition Rates
Decrease for managers
but may not have much
impact on associates

Customer Satisfaction
May
increase
or
decrease based on
strategy pursued by
manager

No additional useful Can give further insights

data will be found
into the ling between
strategy
of
store
managers and customer
satisfaction
Decrease
Will Improve
No change
No change

We can see from the attribute tables above that though Shareit has shown promise in the short run it is
highly questionable if it would succeed in the long run. So we need to build on its strong points such as
profit sharing but should also work on linking it to other organizational goals such as customer
satisfaction to build a compensation plant the is most beneficial to the organization in the long run.
As it is clearly evident from the Long run attribute table we recommend option 3 i.e. stop and modify
the Shareit program before conducting further trials or a full firm wide implementation.

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