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Chapter 12 Management Compensation Case Study Wayside Inns Inc PDF Free
Chapter 12 Management Compensation Case Study Wayside Inns Inc PDF Free
Arranged by:
Eigha Aprilia S (16312086)
International Program
Universitas Islam Indonesia
2018
Table of Contents
Chapter 1 : Introduction..............................................................................….
…..……2
Chapter 2 : Discussion….............................................................................….…..……3
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Chapter 1
Introduction
1.1 Study Background
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Inn manager Layne Rembert also expressed concern about proposed expansion,
in particular, the expansion of 80 rooms at other lodgings at the center of Toledo, will
reduce the value of returns on these investments. Case this was formed from the
conversation when Wayside Inns Regional GM Kevin Gray visit Memphis Airport
Wayside Inn for inspection and Layne Rambert's Lodging manager. Rembert was
skeptical of the new investment, remembering Income compensation is associated
with lodging ROI, as is the case seen in Toledo, where the ROI on new investments
dropped which eventually affect compensation. On the other hand, Gray hopes to
continue to grow.
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Chapter 2
Discussion
2.1 Is the proposed investment likely to be a good one for Wayside Inns, Inc?
Pro side: The proposed expansion appears to meet the firm’s stated expansion
criteria; The existing inn is clearly operating at or near its practical capacity; The
analysis is based on one year only, and it ignores the fact that the management and
reservation fees stay within the overall firm.
Con side: The ROI is projected to decrease with the investment; The turnover
count might be grossly overstated. This depends on how these data are collected. The
same person could show up on the turnaway count of several reservation services;
There is a risk of being hurt by either a downturn in the economy or overbuilding in
the local market.
Drawing conclusions whether the proposed investment is likely to be a good one
is not easy in this case. However, the pro case would appear to be more convincing
over the long run.
2.3 Is the current compensation package for inn manager an appropriate one? If
not, what would be?
The management couples are directly responsible for such factors as the internal
and external appearance of the motel, the cleanliness of the rooms and the attitude of
the front desk personnel. They also have some influence over direct costs,
administrative and financial costs, and over the volume of business. Therefore the
Performance Evaluation Report could be argued to be included as one of the
determinants of compensation.
The regional general manager has a key role and this might raise the anxiety level
of the management couples. To ensure some uniformity of evaluation techniques
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across the various inns, a travelling inspector could for example be employed to
periodically check such things as room cleanliness etc.
A naturally-based ROI system is unfair because it is tied to a historical cost
measurement system. Older property has a higher ROI because the investment base is
somewhat smaller. This will make almost all proposed extensions look less profitable
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Chapter 3
Conclusion and Recommendation
3.1 Conclusion
Wayside Inns was formed in 1980 as the successor to United Motels Enterprises,
a company that operated several franchised motels under licensing agreements from
two national chains. Wayside has been experiencing brisk business and is currently
operating at near full capacity. To capture more business Wayside is considering a 40-
room expansion for the motel. Inn manager Layne Rembert also expressed concern
about proposed expansion, in particular, the expansion of 80 rooms at other lodgings
at the center of Toledo, will reduce the value of returns on these investments.
However, the current compensation plan is actually incongruent with the
company’s corporate objectives, as demonstrated by the circumstances involved in the
proposed investment (of a 40 room expansion) at the Memphis Airport Wayside Inns.
While the proposed expansion will reduce the opportunity cost of present turn-aways
(since the motel is near its full capacity), the unit manager is not motivated to pursue
the said investment as it will decrease the outlet’s ROI, accordingly reducing his
return on Investment bonus. Furthermore, performance measures should have factors
that a unit manager has control over; however, investments and expansions are under
the discretion of corporate head5uarters.
3.2 Recommendation
Wayside Inns Inc. is a strong company, but a number of changes will need to be
implemented to do even better. These are:
•Fairer rewards systems that take into account factors out of manager’s reasonable
control
•Lower/ditch the fringe benefits as a form of compensation as it is not tied to a
performance measure
The current compensation system of Wayside Inns is appropriate and congruent
with corporate ob1ectives, except for the return on Investment bonus. Thus, ROI
should not be included in a unit manager’s performance indicator since investment
decisions are not within a unit manager’s control. Instead, the company should replace
the ROI bonus with "customer satisfaction.7 8nder the circumstance that the business
is in the hospitality industry and mainly provides service as its main commodity,
customer satisfaction is a more suitable index to measure the manager’s performance
and it is a factor that is well within the unit manager’s control.