High School

Exsell is a popular consumer goods company known for hiring the best resources and using the best technology to produce an extensive range of goods. The manufacturing units consider productivity to be the only criterion; targets are upgraded, supervised, and rewarded amply. The groups with the highest productivity in each manufacturing unit owned by Exsell are incentivized using a substantial monthly monetary reward program.

Of late, there have been some rumors about the company not doing very well in the market. Many claims of defective quality, declining market share, and employee unrest have been circulating. However, the CEO of Exsell recently held a conference with the organization and the media to share its expansion plans for the coming year. He ended the conference with a discussion of how the profit margin of the company had grown substantially, but many employees were left in doubt.

Which of the following, if true, would indicate the need for Exsell to replace gainsharing with profit-sharing as a variable pay program for its employees?

A) The company used a merit-based pay plan for decades to reward the employees who deserved recognition for good performance.

B) The company has opened multiple product categories and is experiencing brand dilution.

C) Executives who receive and evaluate client feedback have found a lot of quality concerns with the products dispatched in recent times.

D) The economy is showing signs of robust growth after last year's recession and losses.

E) The consumer goods industry has traditionally had higher barriers to entry than other industries of similar size and reach.

Answer :

Final answer:

Exsell may need to shift from a gainsharing to a profit-sharing program if it's found that its emphasis on productivity is undermining product quality, impacting profitability and market position. Switching to a profit-sharing program would incentivize overall profitability rather than sheer production quantity.

Explanation:

The question suggests that Exsell might need to replace gainsharing with profit-sharing as a variable pay program. This idea can be supported if it is true that the quality of the products has taken a hit despite high productivity levels (option C). If increasing productivity is leading to a compromise in quality, this means that an overemphasis on quantity and speed of production, driven by the gainsharing incentive plan, maybe leading to quality shortcuts.

A profit-sharing plan could incentivize overall business performance and profitability over sheer production output, which might be a more sustainable model for the company. It could encourage employees to care about product quality as that would ultimately affect the profitability of the company in the long run.

It is important for a business like Exsell to balance the need for high productivity with a focus on quality to ensure its market position and profitability.

Learn more about profit-sharing program

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