Hi Friends,
                                              Even as I launch this today ( my 80th Birthday ), I realize that there is yet so much to say and do.
                                                  There is just no time to look back, no time to wonder,"Will anyone read these pages?"
                                       With regards,
                                       Hemen Parekh
                                       27 June 2013

Sunday, 27 March 2005

INCENTIVE SCHEME FOR 2005/06 THRU 2008/09

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.