Heartland Chamber of Commerce

530 Words3 Pages
Introduction The Heartland Chamber of Commerce is a business network. It provides a variety of services to member businesses. Heartland recently hired Noah West as the Director of Membership Development. He is responsible for increasing the chamber’s membership. Moreover, the chamber divides its new customers into four “buckets” according to the size of the company. Average dues for customers increase from Bucket 1 to Bucket 4. Change of the Contract In March 2007, Heartland started using a new compensation contract. The old contract used an annual sales commission rate of 25% for sales up to $40,000 and then increased by 2% for each additional $10,000 of sales. Under this contract, Noah obtained a total salary of $58,777.80, including a sales commission of $23,777.80. Under the calculation of the new compensation system from Exhibit 1, Noah will be able to get a total salary of $54,294.70, including a sales commission of $19,294.70. This indicates a salary loss of $4,483.10. As a new business joins the chamber, the chamber incurs a fixed cost no matter which bucket the business belongs to. Since the revenue generated from the member businesses is a function of size, the profit margin derived from a Bucket 1 business is significantly smaller than that derived from a Bucket 3 or 4 business. Therefore, the company changed the contract to help it realize more meaningful profit on its member businesses. The new contract is beneficial to the chamber because the modified sales commission system encourages more sales from Bucket 3 and 4 companies. However, it does not serve as a reasonable incentive for Noah to generate more sales. The time and effort put into Bucket 3 and 4 companies will be significantly more than that from Bucket 1 and 2 companies. Therefore, Noah might need to spend more time in communicating with people at different organizational

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