R&D Storage Is a Small, but Diversified, Moving and Storage

R&D Storage is a small, but diversified, moving and storage company. In recent years, its corporate income has declined to unacceptable levels. To change the direction of the company, the board of directors hired a new chief executive officer. She is currently considering three alternative ways to reward division managers for performance. They are:
1. Give each manager a competitive salary with no bonus for performance.
2. Give each manager a base salary with the largest portion being a bonus based on performance, ROI being the yardstick.
3. Give each manager a base salary with a bonus based on comparative performance with the other divisions.
Required:
Evaluate each of the ideas, giving strengths and weaknesses.

Correct Answer:

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1. Opportunities for salary increases mi...

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