Visionary Design Systems (VDS) is a high-tech full-service systems integration firm in Silicon Valley. All the employees of VDS are shareholders in the firm. Part of their income is derived from commissions and bonuses. The firm highly encourages empowerment. It believes that employees should be empowered, be given enough autonomy and responsibility which are necessary for them to make their own decisions. Under such encouragement, all employees participate in the decision-making process within the company. This case study deals with a group of these employees who rely on directions from and approval of the top management before delving into action, despite the fact that this group is empowered with the authority to venture into a possible market opportunity for Visionary Design Systems.
George P. Baker, Karin B. Monsler
Harvard Business School (495011-PDF-ENG)
Oct 18, 1994 (Revision: Apr 14, 1995)
Case questions answered:
- What is your assessment of the (a) Visionary Design Systems philosophy (values) and (b) compensation system?
- What is your analysis of the PDM problem?
- How should it be resolved? What changes in strategies or practices, if any, do you recommend?
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Visionary Design Systems: Are Incentives Enough? Case Answers
Visionary Design Systems’ Philosophy and Compensation Scheme
Visionary Design Systems is a company with a peculiar vision of how employees should be treated and rewarded. They believe every employee should be empowered, giving them the autonomy and responsibility necessary to make their own decisions.
In order for them to make the ‘right’ decisions, VDS gives training to all its employees so that they are able to understand the business from a manager’s point of view.
They are also given shares of the company with the purpose of making it in their own interest to foster the firm’s growth. This philosophy has allowed Visionary Design Systems to accelerate the decision-making process and has made it easier to stay closer to customers, as decisions are being made by the people who are actually involved and are the most knowledgeable about the issues concerned. According to the case, “the company’s growth record and retention rate spoke to the success of this philosophy.”
This is all part of Visionary Design Systems’ signature experience, which they use to attract and retain the right type of people for the company (Erickson & Gratton, 2007). The employee targeting strategy of the company has fostered a good working environment where the atmosphere is one of friendliness and respect for one another. For example, they offer a lower base salary than average to weed out those who are more interested in the pay than in the company’s values.
Visionary Design Systems also tries to address specific business needs, particularly by adapting each job category’s compensation system – sales representatives earn more in commissions and less on base salary, whilst specialists’ base salary is the greatest part of their total pay. By adapting its structures to different types of employees, VDS motivates its employees to be loyal and to perform exceptionally.
The compensation system at Visionary Design Systems rewards according to the productivity of each employee instead of the employee’s position or tenure in the company. As the base salary is almost the same for every employee in the same job category, the differences in income…
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