Reference no: EM133480668

CASE STUDY - The Fit Stop (Strategic Compensation in Canada, Richard Long)

The Fit Stop Ltd. is a brand new firm that will open its doors exactly 4 months from today. Its business objective is to sell all types of training, fitness, conditioning, and exercise equipment to the general public. The Fit Stop plans to specialize in this equipment and to provide customers with personalized advice geared to a customer's specific training or conditioning needs (e.g., training for a particular sport, rehabilitation from injuries, strengthening of back muscles to deal with back pain, general conditioning and fitness), whether the customer is 8 or 80 years of age.

In order to provide high quality advice, each store will employ a physiotherapist (to provide advice on problems such as injuries or chronic back pain) and a person with a bachelor's degree in kinesiology (to provide advice on training for various sports or other physical activities). In fact, a staff member will even sit down with customers and develop a personalized training or conditioning program that meets their own specific objectives and needs, at no cost to the customer.

The remainder of the staff in the store will consist of a manager, with a Bachelor of Commerce degree, and sales staff, who will have at least high school diplomas. Due to the long opening hours, it is expected that between 8 and 12 salespeople will be needed for each store. Because the stores are located in shopping malls, they will operate on a 7 day a week basis, open 9-9 weekdays, 9-6 Saturdays, and 12-6 on Sundays.

Aside from personally helping customers, the roles of the physiotherapist and kinesiologist will be to train other employees in how each type of equipment can be used for various conditioning and rehabilitation purposes. Initially, sales staff will be given general training, but as time goes by, each salesperson will be expected to learn in depth about all the different pieces of equipment, to help customers diagnose their needs accurately, and to be able to explain proper usage of the equipment. Because of the high level of training required, all employees will be full time.

The founder of the business is Susan Superfit, who has undergraduate degrees in kinesiology and commerce from the University of Saskatchewan. While at university, she participated in numerous sports (and suffered numerous injuries due to her all out style of play.) She came up with the idea for this business while laid up with one of her injuries.

While there were businesses that sold fitness and conditioning equipment, she often found that the people selling them had very limited knowledge about the equipment and often gave poor advice on what to buy and how to use it.

She has secured funding from private investors and from Working Ventures, a large Canadian labour-sponsored investment fund. In order to get volume discounts on the equipment she will be purchasing and to beat competitors into the market, she wants to start off quite large, with stores in major cities in Ontario and the 4 western provinces, before expanding to Quebec and the Atlantic provinces. She knows that this is a risky strategy, and that cost control will be essential to keep the business going long enough to become well known and develop a stable clientele. She does not expect the business to make a profit for at least one year, or maybe even two.

Her main competitors will be sporting goods mega-stores and department and discount stores, each of which sells some of the same equipment. Some of these outlets will be able to price their equipment lower than The Fit Stop will be able to, but none have the range of equipment that The Fit Stop will have, and none provide the personalized service that The Fit Stop will.

Susan believes that the key to her business success will be highly motivated and knowledgeable employees who have a strong concern for their customers and are able to work as a team with the other employees to provide the best possible customer service. Since no two customers are exactly alike, employees will have to be innovative in developing solutions that fit their needs. It will also be crucial to keep up with the latest fitness and training trends, as knowledge about fitness is continually increasing, along with new and different types of specialized equipment. A key aspect of company strategy is to be the most up to date and advanced supplier of new products and techniques.

1. Formulate a compensation strategy for sales staff, and give your rationale for each element of the strategy, using the following
guidelines:

a. Briefly define the managerial strategy and required behaviour that would be most effective for this firm.

b. Determine the compensation mix. Give specific recommendations around Base Pay (i.e. how it will be determined), Performance Pay, and Indirect Pay (i.e., which benefits). Do NOT provide percentages.

c. Specify the compensation level

2. The Fit Stop currently has no formal performance appraisal system. Recommend a performance appraisal system (including methods and sources) and justify your recommendation.