Developing a Remuneration and Performance Management System for Beautiful Clothes

This assignment is designed to develop knowledge and skills about the fit between theory and practice. The practical case below covers reasonably common issues. 

Mary runs and owns a fashion design and brand company called Beautiful Clothes. It began 20 years ago, was really successful, and then started to do poorly as it didn’t keep up with fashions. When she bought it sales had been declining, its clientele had aged, but it was still well regarded because of its legacy. 

Mary bought it 1 year ago and wants to really change things. She wants to bring in fresh ideas, new fabric concepts, and get sales and loyalty from the next generation of young professional women. Her current buyer demographic is someone now in their 40s, who connected to the brand in their 20s. She wants a softer, more natural look. With an upgraded brand image, she thinks she can move into the US – based on a niche of sustainable clothing for successful professional women. 

80% of sales are to Australian retailers. The remaining 20% of the product is sold in New Zealand. Design and sales are managed from New Zealand. Manufacturing is in China. When Mary bought Beautiful Clothes there were just 4 designers, 2 of whom resigned. Good riddance Mary thought. The remaining two are only staying because of the possibility of change – having pushed for change for years. Mary wants to hire 3 more designers, and believes strongly in a creative team-based approach to design.

There are 7 salespeople (who spend much of their time on sales trips) and 3 buyers, who organise the production and purchase in China. They also travel a lot. Mary does most of the financial, administration and HR duties herself. 

The 7 sales people traditionally receive a basic retainer, and a commission for each sale they made (5% of the gross margin for each sale). All other employees receive an annual salary based on what seemed to be the going rate for their job at the time of hiring, plus occasional cost of living adjustments based on the rate of inflation.

At the end of each financial year the past owner / manager decided what kind of a pay increase each staff member would get, bearing in mind the company’s profitability, the going rate for pay increases she heard of in industry gossip, and her judgement of each person’s worth to the company. 

Mary believes she needs to improve the remuneration and performance management system to drive the firm in the direction she wants. She believes she now needs to implement a formal system for managing performance and remuneration. Soon the company’s total staff will be:

5 designers

7 sales people

3 buyers

Total: 15 employees

Mary wants to professionalise her company and get away from the stale antiquated management systems of the past. Mary has asked you, a consultant, for advice on remuneration for:

? designers

? sales people

? buyers

Include in your advice on whether you would assess performance and if so, how.