Wayside Inns Inc

5 Pages   |   1,232 Words
  1. What are the arguments for and against the proposed investment?
Wayside Inns, Inc. is a company that is successor to the Mother corporation United Motel Enterprise. This company was founded in 1980 and located in Kansas City, Missouri. The main purpose of this company was to operate, own and license a chain of motels under the name of Waysides Inn. And further operate the franchises held by the mother company, the United.
The Wayside Inc. has a strategy that if they would make their own motel chain instead of franchising the other’s motels. They would have greater flexibility in the implementation of their corporate plans. Moreover this strategy would help Wayside Inc. in the implementation of their Comprehensive marketing plan which they have been developing from the past seven years. The main arguments in the favor of this strategy are a bit over head than the arguments that are against this investment Strategy. As according to the strategy the Wayside Inc. would locate its property near the interstate highways or the major arteries convenient to commercial districts.

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Such locations would help Wayside Inc. to attract the greater number of the customers. Because the customers that are out of their homes, out of their districts and out of their states would be in extreme need of the motel that would provide them the required shelter, food and other necessities of life. Further it would be suitable to the customers to go that motel which is closer to their way. Thus the Wayside Inc. would get many advantages by having its properties on interstate highways.The arguments in the favor of this strategy further counts that, as the Wayside Inc. would be having the five or six locations having 200 hundred rooms instead of having a single giant hotel of 600 rooms at one place. This aspect further strengthens the feasibility of the investment strategy. Because, having five to six different locations in the same city would be more beneficial as this would provide more flexibility to the customers to choose the location best suitable to them.

Apart from the positive aspects of this strategy, there would be also appearing certain setbacks by the implementation of this strategy. As the Wayside would be having different building on the different locations. Thus different costs would be incurred, relating to the different locations. The other disadvantage of the different location would be that, the management has to construct every complementary structure separately for every location. Instead if there would be only one hotel containing the 700 rooms the management could reduce its costs related to the hotel due to economies of scale, which means that it costs less when something is produced at a large scale. The issue of the interaction and hence coordination between the managers of different locations will also appear. As it is easier for the employees and the management to work at one place because they can interact easily. Whereas it is difficult to have regular interactions from different places.
  1. Is Layne’s concern justified?       
Layne was a unit manager and his concern was to give the bonus on return on Investment (ROI) basis.  His concern was not justified,because the return on investment (ROI) related bonus would result in reduction of ROI, due to the increased investment. Even though the compensation management should be such. In which the unit manager must have a control over all the variables that affects the profitability of Company. But this is not applicable in this case because the unit manager has no control over investments as that is expected to be done through a corporate call. We can also see from the exhibit on Performance Factor. When the size of investment increases, though ROI may go down due to potential downside on capacity utilization, there is an upside in the performance factor and hence there is no incremental loss on compensation.  Moreover if we believe the calculations by gray, we find that the compensation is in fact increasing from $29712 to $33775 within which the ROI Bonus too is on the rise from $ 9743 to $10914 after the investment.

3. What do you think about how Gray makes decisions about salary increases?

The Salary plan was based on the three component s of the salary, which can be summarized as Base Salary, Sales volume Compensation and Return on Investment Bonus. Thus in order to determine the increased salary, gray has to find the impact of the certain expansion on the Sales Volume and Return on Investment. As the base salary would remain the same no matter it is before expansion or after expansion. Thus the increased salary would only be determined by calculating the increased Sales volume compensation and increased return on investment bonus.  Moreover according to Gray’s 20 Point Performance Evaluation Report, the compensation management will be more customer oriented, mean the compensation plan would be based on the satisfaction of the customer s and less revenue oriented. Because in this case, the firm is customer service company and not just a money making industry alone.
Previous Salary   Increased Salary
Components of Salary     Components of Salary  
Base Salary $18,500   Base Salary 18,500
Sales Volume  $ 1,469   Sales Volume  $ 4,361
Return on Investment Bonus  $ 9,743   Return on Investment Bonus  $10,914
Total Compensation  $29,712   Total Compensation  $33,775
4. Should the performance measurement system for a regional general manager (RGM) be focused on the same factors that are used by Gray and Wayside Inns to evaluate and compensate an inn manager? An RGM has responsibility for a geographical area containing anywhere from 10 to 15 motels.

The main purpose of any compensation system should be to ensure that every worker’s activity has been fairly evaluated and rewarded. So that the motivation and enthusiasm of the workers may not be hurt. And further they would be able to become more company loyal employees. Thus the compensation system plays a dynamic role in, strengthening a company so that it can implement the corporate and business level strategies, in order to make the company more efficient and profitable. The Performance measurement system that was adopted by the gray and Wayside Inns was mainly focused on the productivity of the employees. In the evaluation of the employees it counted for the behavior of the employees and how much they were successful in satisfying the customers. Furthermore, gray and Wayside Inn also evaluated the employees, on their performance of their duties or the work which was assigned to them. The Regional General Manager on the other hand has the greater responsibility and accountability. Hence there should be a little difference in his/her evaluation system, as compared to that of a unit manager. The main variable on which both, the unit and regional manager evaluate and hence compensate the employees, are mostly and largely same. But the regional manager would also be looking for the leadership trait of the employees. Regional manager would have to ensure the corporate success in the terms of the specified motels that comes under his/ her jurisdiction. Thus the major of the evaluation should be on performance. As there may be the case in which all the motel are to attaining the same level of profitability. Thus in this case the regional manager should compensate the employees on the basis of their performance (how much they are success full in generating the revenue)

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