52.II.3.

1. Few symptoms are

Complaints from store managers regarding the performance of their sales staff.
Observing sales employees tended to stand near the store entrance waiting for
customers and would occasionally argue over ownership of the customer.
Some parts of the store unattended by staff.
2. The new incentive system is the root cause that led to these symptoms. Because before the
introduction of new incentive system, every sales staff share responsibility for restocking
inventory and completing inventory reorder forms along with the sales. But now, they are
engaged in grabbing customers from other sales staff and left the inventory maintenance as a
result of which stores experienced stock shortages. Potential sales also suffered from empty
shelves when plenty of merchandise was available in the back store room or at the warehouse.
3. Though the new incentive system is intended to encourage employees to actively serve
customers and to increase sales volume, it is mainly focused on sales only. But some
employees are contributing towards inventory management also which they deserve some
incentive. A sales staff gives his maximum effort to sell the product to willing and non-willing
customers also. He dont want the customers to return their merchandise once purchased. If
returned, the sales person should not be blamed. I suggest the following actions to be taken by
the organization to correct these problems.
Adding additional incentive to inventory maintenance
Assigning staff to specific areas of the store and shuffling them periodically which
reduces resentment among employees stationed in areas with less traffic or lower priced
merchandise and low pay cheque. This also eliminates the problem of sales employees
standing near the store entrance waiting for customers.
Returned merchandise should not be discounted from commission. There should be a
return policy or exchange policy which should clearly say there will be exchange only or
to the extent of the store manager, he can take decision without penalizing the sales
staff.

14.II.3
Project

Cost
(Rs.
000)

NPV
(Rs.
000)

Profitability Index (PI) = 1 + (Net

Present Value / Initial Investment
Required)

Rank

1000

210 1.21

6000

1560 1.26

5000

850 1.17

2000

260 1.13

2500

500 1.20

500

95 1.19

Total available funds (Rs. ,,000)=Rs. 8000

By the above ranking, I choose projects with rank 1,2,4 with a cost of 7500 and
leave 500 as idle cash
Project B
Project A
Project F

6000
1000
500