Evaluating a Hiring and Variable-Pay PlanEffective Management Solutions (EMS) is a small, rapidly growing management consulting company. EMS has divided its practice into four areas: management sys-tems, business process improvement, human resources, and quality improvement. Strategically, EMS has embarked on an aggressive revenue growth plan, seeking a 25% revenue increase in each of the next five years for each of the four practice areas. A key component of its plan involves staffing growth, since most of EMS’s current entry-level consultants (associates) are at peak client loads and cannot take on additional clients; the associates are also at peak hours load, working an average of 2,500 billable hours per year.Staffing strategy and planning have resulted in the following information and projections. Each practice area currently has 25 associates, the entry-level position and title. Each year, on average, each practice area has five associates promoted to senior associate within the area (there are no promotions or transfers across areas, due to differing KSAO requirements), and five associates leave EMS, mostly to go to other consulting firms. Replacement staffing thus averages 10 new associates in each practice area, for a total of 40 per year. To meet the revenue growth goals, each practice area will need to hire 15 new associates each year, for a total of 60. A total of 100 associate new hires will thus be needed each year (40 for replacement and 60 for growth).Currently, EMS provides each job offer receiver with a generous benefits pack-age plus what it deems to be a competitive salary that is nonnegotiable. About 50% of such offers are accepted. Most of those who reject the offer are the highest-quality applicants; they take jobs in larger, more established consulting firms that provide somewhat below-market salaries but high-upside monetary potential through vari-ous short-term variable-pay programs, plus rapid promotions.Faced with these realities and projections, EMS recognizes that its current job offer practices need to be revamped. Accordingly, it has asked Manuel Rodriguez, who functions as a one-person HR “department” for EMS, to develop a job offer proposal for the EMS partners to consider at their next meeting. The partners tell Rodriguez they want a plan that will increase the job offer acceptance rate, slowdownthe outflow of associates to other firms, and not create dissatisfaction among the currently employed associates.In response, Rodriguez developed the proposed hiring and variable pay (HVP) program. It has as its cornerstone varying monetary risk/reward packages through a combination of base and short-term variable (bonus) pay plans.
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