Texas PetroChemical: Designing an Effective Incentive Program

In 2003, a Fortune 500 chemical company with global interests in health care, nutrition, and high-tech materials wanted to accelerate its aggressive growth strategy. To accomplish this goal, senior management appointed a central design team to launch a variable pay program and to develop metrics to monitor the progress of its business units. How should the company move away from the entrenched system of hourly wages at its manufacturing facilities? And how could it encourage growth and improvements at its corporate headquarters? In this case, students learn the challenges of designing an effective incentive program.