The Atlas Corporation rents and sells furniture and appliances to individual consumers. The company’s primary market focuses on customers who rent-to-own; the customer pays a rental charge (which includes a 28 percent interest rate) for a specified time and at the end of that time, owns the furniture. Atlas has its own credit department for these contracts. Over the past two years, it has been difficult to collect customer payments in a timely manner. As a result, Atlas has experienced a sharp drop in profitability. The effect on profitability is such that Atlas now pays a higher interest rate (8 percent) to its bank to carry its own indebtedness. Atlas wants the accounts receivable (A/R) department to increase its collection of past-due bills. It has turned to you in the HR department to develop a system to incent and reward A/R clerks who increase the dollars in collections each month. Each A/R clerk is a non-exempt hourly employee. Applying what you know about what makes incentives and rewards effective, think through the process of designing an incentive and reward program for Atlas. Identify any issues that must be addressed. The information in the table below provides the previous year’s results (“Monthly Total” means the amount due but NOT collected in that month). Case Study: Improving Collections At Atlas Corporation PREVIOUS YEAR’S OUTSTANDING PAST-DUE ACCOUNTS (By Clerk) MONTH Clerk A Clerk B Clerk C Clerk D MONTHLY TOTAL Jan $3,000 $5,000 $5,000 $2,000 $15,000 Feb $3,000 $11,000 $17,000 $4,000 $35,000 Mar $2,000 $4,000 $5,000 $5,000 $16,000 Apr $13,000 $2,000 $6,000 $12,000 $33,000 May $8,000 $19,000 $2,000 $3,000 $32,000 Jun $3,000 $4,000 $8,000 $17,000 $32,000 Jul $2,000 $10,000 $5,000 $8,000 $25,000 Aug $5,000 $2,000 $1,000 $2,000 $10,000 Sep $11,000 $8,000 $0 $4,000 $23,000 Oct $22,000 $5,000 $5,000 $8,000 $40,000 Nov $3,000 $3,000 $2,000 $5,000 $13,000 Dec $1,000 $4,000 $5,000 $2,000 $12,000 YEARLY TOTAL $76,000 $77,000 $61,000 $72,000 $286,000 4 © 2009 Society for Human Resource Management. Dale Dwyer, Ph.D. Provide your rationale for the following questions: 1. What do you think is a realistic goal for Atlas to set to reduce outstanding amounts each month? This can be in dollars or a percentage of the total amount currently due. 2. Should this be an individual-based incentive, a team-based incentive, or a combination? How would you design it? 3. When should the incentive/reward be given—monthly, quarterly or annually? 4. How should it be given—publicly or privately? 5. What should the reward(s) or incentive(s) be? Who should determine what they will be and how they will be distributed?
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