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
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:
- 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
- Should this be an individual-based incentive, a team-based incentive, or a
combination? How would you design it?
- When should the incentive/reward be given—monthly, quarterly or annually?
- How should it be given—publicly or privately?
- What should the reward(s) or incentive(s) be? Who should determine what they
will be and how they will be distributed?