27 March
2005
Nirmit/Raju,
INCENTIVE
SCHEME FOR 2005/06 THRU 2008/09
·
Please
see enclosed calculations for the next 4 Years.
·
From
the graphs, it is clear that if the present trend/pattern of
-
Net
Collections
-
Total
Salaries
-
Total
of (Salaries + Incentives + Bonus)
Continues
as they have during past 4 years, then our
Employee
Cost / Net Collection = Ratio
Will
keep getting worse & worse. It has already deteriorated
From
23.75% in 2001/02
To
……..? in 2004/05
If
this trend continues 3P will close down in 2/3 years.
Hence
this trend MUST be reversed and brought back to
20%
by 2008-09
I
realize that this figure cannot be achieved in one year. So, I am setting
following targets
Year Employee
cost/Net Collection=Ratio
2005/06 29%
2006/07 26%
2007/08 23%
2008/09 20%
These targets are NOT debatable.
Now,
How can we go about achieving these targets?
We can
·
Reduce
Employee Cost alone - Not Possible
·
Let
Employee cost rise at a moderate rate but Raise Net collections
dramatically - Possible
and most Workable thru,
increased
employee
productivity.
Once, We limit/Restrict “Employee Cost” as a certain percentage
of Net collection, we have following scenario:
Employee
Coast (for a given year)
Fixed Component (Salaries) Variable Component
(Bonus
+Incentive)
Obviously, the first “claimant” is
- Fixed component (i.e. Salaries)
If, after paying salaries, any surplus amount is left,
that would go to pay the Bonus/Incentives.
So, if there is no “Surplus, then there is no Gonus/
Incentive.
This CARDINAL RULE must be made abundantly clear/transparent
to all employees in writing
In case there is a “SURPLUS” then how that amount should
get distributed amongst all employees (consultants + support staff), you may
decide, using some formula which is
- Transparent
- Known in advance
- Equitable to all employees.
If you wish to make some more projection (of employee
cost/Net collections/No. of employees etc etc.)
Feel free to do so, without violating “RATIOS mentioned
earlier.
I await your proposal.
