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Read the Businessweek Case: BMW Aligns Executive Bonuses with Workers’ Bonuses.
Question:
1. Based on the information given, summarize the method(s) BMW intends to use for determining incentive pay. Are these rewards for individual, group, and/or company performance?
2. Explain BMW’s claim that under the new bonus program, ‘upper-level management could potentially lose more money than their lower-level counterparts for bad performance.’ Does this sound like a system that would support BMW’s business strategy? Why or why not?
3. BMW says that one motivation for the new bonus method is to establish ‘sustainable personnel politics” in which employees have a positive relationship with the company. Describe how you think employees would rate the fairness of tying executive bonuses to their bonuses. Describe how you think executives would rate the plan’s fairness. Why is fairness an important quality of incentive pay?
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