The Importance of Incentive Plans in Real Estate Firms

Which incentive option is Frank choosing?

a. Do you think that high level performers should get the bulk of the rewards in an organization or should the rewards be meted out in a more egalitarian fashion?

b. Let’s say Stacey represents most of the realtors of the firm. How could Frank have improved the cooperative development of incentives with Stacey prior to incentive initiation?

c. Given Frank’s strategic purposes, what alternative incentive plans would be appropriate for this real estate firm? Consider incentive plans mentioned in the chapter.

Answer:

The new incentive policy: Realtors can receive up to four hours of floor time per month if they had a transaction in the last three months. Realtors receive one additional hour of floor time per month for exceeding three transactions in a three month period. If there are four transactions in a three month period, Realtors receive one additional hour. If there are five transactions, Realtors receive two additional hours. Six transactions lead to three hours and so on. Realtors receive one additional hour of floor time per month for referring one person to Frank's training program. They receive for two people three hours for three people and so on.

a)

Over here If we talk about Stacey she has been a Realtor with Frank's Brokerage firm for the last 15 years and old employee. As she was on vacation, hence she was unaware of this new incentive policy. Since she was on vacation, which means she had insufficient transactions, hence the system did not allow her to sign up for floor time. On the other hand, Trina received 20 hours of floor time. Trina performed well as she had staff that helps her sales and even hired a person to find Realtors to go to training seminars. In this case, the situation should have been dealt with treating everyone equally. Yes, it is true that high performers need to be rewarded, however, there should be an equal policy for every employee. As Stacey resumed work after a gap, she was unaware of the new policy structure, hence Frank should have designed a different incentive structure for her. And also for newcomers.

b)

As stated, Stacey was an old employee working with Frank's firm for the last 15 years and she may have been on vacation during February and was gone in late March. Hence, she was unaware of the new incentive policy structure. She was not possessing enough transactions and when she resumed work, the system did not allow her to sign up for floor hours. This incentive plan was also unfair to newcomers who were not getting floor time. Therefore, Frank should have developed another incentive plan for employees like Stacey, who had been with the firm for a long time and had performed well in the past. There should have been a different approach or strategy for newcomers as well, as they did not get floor time.

Frank should have discussed a different incentive policy structure for Stacey as she would not be devoting productive time to work due to her vacation. In this way, the situation could have been treated in an egalitarian way.

c) Some of the Incentive Plans:

Incentives are awards provided or given out when predetermined objectives have been achieved within the firm. When an employee's performance exceeds a pre-determined target, they tend to be granted a form of incentive payout. This payout can be a one-off payment, a bonus, or take the form of an addition to basic pay which then remains until the next decision period. Bonuses in the future become contingent on future performance, whereas additions to base pay become part of the compensation landscape once it is granted, being independent of future performance sometimes. Opportunities for career progression are seen in an incentive device because they ultimately entail financial rewards, and in various cases, involve opportunities for growth and development.

1) Individual vs. group incentives:

Individual incentives induce hard work and discourage mediocre employees from joining the organization. The employee must be capable of attaining the desired level of performance. The employee must consider the reward valuable and highly dependent on performance. Group incentives include profit-sharing. Team or group incentives could introduce a sense of collective responsibility within the staff with the aim of achieving superior performance through team effort.

2) Short-term vs. Long-term incentives:

Short-term incentives include annual bonuses and commissions based on the preceding period's performance. Incentives can be deferred or long-term in the sense that the benefits are not realized until after some time period has elapsed. Examples can be contributions to the pension funds for company executives and non-vested options awarded to employees.

3) Financial vs. Non-financial type of incentives:

Financial incentives are monetary or cash benefits. Non-financial incentives include non-monetary benefits that do not always involve cash awards. Examples include a company vehicle (cars), recognition, and opportunities for training and development plans.