Percent change 10 8 Figure 1 Percentage Change in Sales и 6 4 2 0 -12 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 Month (rollout month-25) 12 Figure 2 Wage Expense as a Percent of Sales 10 110 8 Percent 6 + 2 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 Month (rollout month-25)
Ladbrecks was founded by members of the Ladbreck family in the 1880s. The first store opened under the name Ladbreck Dry Goods. Building on its history of excellence in customer service, the company initiated its performance-based incentive plan to support its stated firm-wide strategy of "customer emphasis" with "employee empowerment." Management expected it to result in further enhancement of customer service and, consequently, in an increase in sales generated at its stores.
The plan was implemented in stores sequentially as company managers intended to examine and evaluate the plan's impact on sales and profitability. By the end of 1994, ten stores had implemented the plan. In 1995, ten more stores implemented the plan, bringing the total to 20 out of a total of 50.
A typical annual income statement for a pre-plan Ladbreck store before fixed charges, taxes and incidentals looks as follows.
|
INCOME STATEMENT |
TOTAL |
PERCENT |
|
Sales |
$10,000.000 |
100% |
|
COGS |
6,300,000 |
63% |
|
Gross Profit |
3,700,000 |
37% |
|
Employee Salaries |
800,000 |
8% |
|
Profit Before Fixed Charges |
2,900,000 |
29% |
Did the sales impact occur all at once, or did it occur gradually?
What is the impact of the incentive plan on wage expense as a percent of sales?
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