Case | HBS Case Collection | October 1989 (Revised June 1993)

RKO Warner Video, Inc.: Incentive Compensation Plan

by George P. Baker III

Abstract

Details the design and implementation of an incentive bonus plan for video store managers. The problem for top management of the chain is to induce the store managers to "sweat the details," to keep the stores neat and well organized, and to deal courteously and efficiently with customers. The design of the bonus plan is simple: rather than try to measure the neatness of the stores or the quality of customer service directly, give the managers a fraction of the revenue from the store and let them worry about the details themselves. The case ends after a six-month experimental period with the new plan, and leaves the top managers of the chain saying that although revenues have increased, the store management has not improved in terms of managing the details.

Keywords: Acquisition; Change; Strategic Planning; Performance Improvement; Sales; Management; Employee Relationship Management; Situation or Environment; Success; Motion Pictures and Video Industry; Entertainment and Recreation Industry;

Citation:

Baker, George P., III. "RKO Warner Video, Inc.: Incentive Compensation Plan." Harvard Business School Case 190-067, October 1989. (Revised June 1993.)