Plastco Packaging CasePrepared by: Richard Marx Spring 201_ 2 Table of Contents Table of Contents Introduction and Synopsis Background Information/ Current Operating Environment Primary Problems Secondary Problems Alternatives/ Solutions Recommendations Implementation Plan Appendix A - Plastco Departmental Chart Endnotes Bibliography Case Study Analysis Form 2 3 4 7 9 13 18 20 23 24 25 26 3 Introduction and Synopsis This report introduces us to the Plastco Packaging Company, its current operating environment, and the many problems it faces. The report proceeds to identify solutions, and weighs their costs and benefits. This document then proposes some recommendations and an implementation plan to resolve the serious business crisis facing Plastco." Plastco Packaging is a medium sized company producing a variety of plastic bags for the retail chain market. The company is organized into two main departments: the bagmaking and maintenance departments. Plastco’s classical managerial style heavily influences the company's culture and values, employee and labour relations, and compensation system. The maintenance department staff ensures the bag-making machines are regularly serviced and maintained in proper working condition. But it is the bag-making department where Plastco is experiencing poor employee relations and low job satisfaction and low employee motivation as well as significant turnover of female employees. Management is keen to improve the motivation and morale of bag-making employees to boost the quality and quantity of their production. And it has to act quickly because customers are complaining about the quality of the company's plastic bags. What's more alarming is that a competitor has suddenly emerged on the scene. The competitor is producing better quality plastic bags at a lower price and thus is quickly gaining market share. Plastco management recognizes these internal and external changes as triggers to revise its compensation strategy. The company is considering re-designing jobs within the bag-making department to incorporate more intrinsic rewards. By changing its reward strategy, the goal is to add the greatest possible value to their organization and yet remain cost effective. Management is also open to changing its managerial style and organizational structure to improve employee relations, the quality of its products, creditability with customers, and boost profitability and market share to ensure long-term viability. The next heading below examines the structural implications of such a strategy Structural Framework Variables2 Besides the rewards system. Plastco’s bag-making jobs separate thinking from doing and are narrow and fragmented Coordination and departmentation is strict and formalized with a pyramidal hierarchy emphasizing accountability. punishment and some extrinsic rewards. Managerial Strategy Based on the preceding contextual framework. iii. Decision-making and leadership at Plastco is limited to a task-oriented autocratic decision making style. The task of producing Plastco bags is routine. Plastco's environment is stable and non-complex Its corporate strategy can be described as a defender and low cost. v. In terms of job design. The company wants to dominate the narrow plastic bag market. iv. The processes used to control employee behaviour require external control through supervision. Communication can be described as formal and vertical and is restricted. the company has clearly adopted a classical managerial strategy. Its technology can be characterized as long-linked. i. ii. along with strict rules. Plastco’s unionized workforce is low skilled and of modest income. The company produces large batches of identical bags in a standardized way. these are the levers Plastco employs to produce a desired behaviour from its employees. . ii. This structure enables vertical coordination and departmentation by function. iv.4 Background Information: CURRENT OPERATING ENVIRONMENT Contextual Framework Variables1 i. iii. Supervisors are quite controlling of their subordinates actions. Benefits increase with seniority.e. Culture & Values: Classical firms prefer to depend on formal structures and focus very little on organizational culture Human Resources Function: . The last group of workers is the lowest paid at $12/hour and is experiencing almost 100% turnover each year. Competitors. followed by 6 all male bag-making operators. Employees. It is the bag-making department where Plastco is experiencing poor employee relations coupled with low job satisfaction. and finally 6 all female inspector/ packers. Key elements of the company’s task environment include its customers. 4 all male utility workers. The Maintenance Department staff ensures the bag-making machines are regularly serviced and kept in proper working order. reporting relationship and flow of information within Plastco’s bag-making department. In addition. motivation. The reward system (compensation system) at Plastco is an extrinsic economic reward system directly linked to hours worked. morale and significant turnover of its female employees. the bag-making and maintenance departments. This department consists of: • • • • 1 bag-making supervisor at the top. See Appendix A for full details on the salary. the Ministry of Labour and the Provincial Human Rights Commission. Plastco is losing market share to this competitor. Employees: the Company’s non-management employees are unionized and are divided into two departments. the company provides 20% indirect compensation in the form of benefits to company employees. i. Culture & Values & HR Function Competitors: Plastco must contend with an emerging competitor who can produce better quality bags for less. competitors.5 vi. Task Environment/Domain Plastco’s narrow domain is defined by the variety of plastic bags it makes. suppliers and regulatory agencies it must adhere to. or even an HR department operating within Plastco. The company could also choose to contract out the compensation function to firms who specialize in this area. it is more feasible to assume that Plastco would create a new HR Manager position to take on this vital function in collaboration with the union. However.6 Note: The case assigned does not make any mention of a human resources manager. This responsibility could reside with the owner of the company or its CEO. There does not appear to be anyone at Plastco who serves as an HR Generalist to work in concert with the plant managers and two departmental supervisors to motivate employees.3 . it is not clear who bears ultimate responsibility for the successful design and administration of Plastco's compensation system. Plastco absolutely needs approval from the union representing company workers to institute changes to their compensation system via a collective bargaining process. Thus. which is also not mentioned in the case. and Poor interpersonal relationships are creating divisions among the workers. the Plant Manager. There is no HR manager to recruit new and capable staff. initiative. Ineffective Compensation System4 Who’s Involved Plastco CEO. Low Organizational Identification Negative organizational citizenship behvaiour leads to low employee cooperation. and to design and administer the compensation system. Low Employee Motivation Negative task behaviour leads to an inability to reach desired performance levels defined by management as well as decreased job effort. 2 departmental supervisors. and to go the extra mile. Impacts Low Job Satisfaction Negative membership behaviour leads to increased employee turnover. input from workers and the union representing the workers. and no desire from them to demonstrate extra effort. Who’s involved? Plastco's senior management does not appear to be taking the company's human capital very seriously. Impacts It would be cheaper to promote someone within the company to the position of HR manager rather than hiring externally. customer service. Female employees are not being maximized and there is a near 100% turnover of female employees. . Workers group norms are negatively impacting the bag-making department’s output.7 Here are the Primary Problems facing Plastco from most to least severe: 1. values and culture. to work with departmental supervisors to motivate staff. They have yet to hire or promote from within an HR manager and develop a strategic HR plan linked to the company's vision. 2. mission objectives. 3. the maintenance department is not properly servicing the bag-making department's machines resulting in low productivity levels. If relations continue to deteriorate between management and the staff. 5. 4. Impacts Plastco's reduced productivity and reduced quality plastic bags have led to increased customer complaints and high levels of waste. market share and profits. Impacts The company is not following employment equity legislation. Currently. The union has failed to properly represent the female Plastco employees. The female workers could very easily file a grievance with their union given they are not rising within their department and often are blamed unfairly for their incompetence by male colleagues. has led to a loss in customers. with no succession plan in place. Production has fallen to minimum levels and is adversely affecting profitability. Impacts The time and cost of preparing a succession plan is well worth it. Who’s Involved The company's management and hr personnel have not prepared a succession plan to promote from within and attract new talent from outside.8 Who’s Involved Senior management at Plastco has done nothing to promote its female employees into higher positions within the bag-making department and into the management team. . Who’s Involved Production has fallen to minimal levels because there is no real employee communication and coordination between Plastco’s two departments Furthermore. The union could do more to advocate for their career success. This in turn. the company could face a strike only further impairing its productivity and profitability. the company's productivity and bottom line are suffering. There does not appear to be a succession plan in place for employees. Here are the Secondary Problems facing Plastco from most to least severe: 1. Plastco employees are dissatisfied with the rewards they receive Who’s Involved Senior management. or plastic bags manufactured from recycled materials. Impacts Plastco cannot afford to lose its customers and market share. Who’s Involved Since Plastco employees are not happy with their jobs and feel poorly compensated for their work. performance levels have declined resulting in lower productivity and lower quality plastic bags. A shift in consumer attitudes to embrace environmentalism has made the future of the plastic bag industry uncertain. 100% biodegradable bags. Who’s Involved All company employees are at risk if they find themselves in an industry that has no future. HR personnel. i. Impacts The company needs to expand beyond its current narrow domain of only manufacturing conventional plastic bags.e. The company is at real risk of going under if it does not act quickly to turn its production levels and profits around.9 6. Plastco needs to develop alternatives which are cost-effective and popular with customers to regain market share and profitability. A new competitor has emerged offering better quality and cheaper bags. 7. Customers are upset with Plastco’s inconsistent product quality and are migrating over to the new competitor. New alternative bags should be developed and sold immediately. . Plastco's unionized employees and their union. And frankly. Impacts Plastco's employees' reward dissatisfaction was caused by a: 5 • • • • Violation of Psychological Contract Plastco employees believe their job efforts are not fairly compensated.10 Employees wanting to be better compensated may demand better pay at Plastco. If they feel they are not being heard. Management’s reliance on the classical managerial style is only providing enough rewards to foster a bare minimum employee and employer relationship. interactions and outcomes to be unfair in nature 2. Relative Deprivation Plastco female perceive they are worse off compared to their male coworkers.6 Impacts Employee turnover and declining productivity and profits cannot be sustained much longer. Lack of Organizational Justice The bag-making department's employees perceive the company’s procedures. the real employee motivator is the threat of dismissal. They may even decrease their work performance. Plastco's classical managerial strategy is suboptimal and creating a host of employee relations and declining performance and profitability problems. 3. as well as company loyalty. As a result. Given the extremely high level of female employee turnover. or leave the company altogether. they may demand improved job duties. membership behaviour and organization citizenship are all low. job and reward satisfaction. Employees perceive an inequity for the rewards they receive for all their hard work. Plastco's classical managerial strategy is suboptimal and creating a host of employee relations and declining performance and profitability problems. Plastco may be subject to a grievance. Who’s Involved . The current rewards are not sufficiently motivating staff. Market conditions and customer satisfaction are deteriorating rapidly particularly as a new competitor has emerged on the scene. lower level employees in both departments have to rely on vertical communication up through their supervisors and the plant manager. Employee relations are so poor that a rift now exists between the two departments. 4.11 Company management. one operator leaves the company every year. Female employees may very well file a grievance with the union or a human rights complaint with the provincial human rights commission. Given that women employees are not advancing up the department ranks and their turnover is nearly 100%. 5. This is impairing their sense of organizational commitment and creating a lack of confidence in management. they have clear grounds to file a grievance. See Appendix A for an illustration of this flow of information. Within the bag-making department. 33% or 1. Who’s Involved An imminent workplace conflict may be brewing between Plastco’s management team and its unionized employees .32 utility workers depart every year. Plastco bag-making department’s unionized employees and their union. Impacts There is poor communication between the two departments. and within the bag-making department. Plastco's management needs approval from the employee union to institute changes to their compensation system via a collective bargaining process. Impacts Continued employee turnover cannot be sustained for much longer. Communication then flows back down again so that they may finally communicate with each other. and the four utility workers earn $18/hr followed by the six female who only earn $12/hr. The six bag making operators earn $24/hr. Nearly 100% or almost 6 out of 6 of the female inspector/packers leave the company every year. The wage gaps across the bag-making department are creating serious tensions and contributing to employee turnover. Currently. Who’s Involved Employees from both departments and employees within the bag-making department. the union may push for a grievance and possibly a strike in an attempt to improve working conditions for its members. Management should also investigate a variety of organizational and workplace innovations to improve employee as well as labour relations. . the union may call for a strike and that would be disastrous to company production and profits. Plastco may not be in a position to tie up its management staff for so long even though it may not have a choice. It may take 4 months to a year for the union and company to agree on compensation changes. But collective bargaining takes time. Impacts Management should be keen on creating more harmonious relations with the union. The length of time depends on the changes proposed. If employee and labour relations continue to deteriorate.12 If management is not careful. and how complex they are to administer. and promote desired work behaviour. 8 These five dimensions are as follows: o task identity o task significance o skill variety o job autonomy o job feedback • Strive to offer a comprehensive total rewards package. This method of pay increases with an employee’s tenure. • Plastco needs union approval before it can implement performance pay which is in opposition to seniority-based pay. company pension plan and stock options to help employees reach their potential at work and at home. This is time it may not have given its current unfortunate position in the marketplace. Intrinsic needs are the non-financial psychological rewards employees receive by completing meaningful work and doing it well.13 Alternative/ Solutions 1. comprehensive health and wellness benefits. vacation package. and ensure pay equity. this solution can motivate employees. • • Meet employees' intrinsic needs leading to greater work satisfaction and performance. controls compensation costs. BENEFITS/ PROS • If designed properly. 7 • Redesign employee jobs to contain the 5 intrinsically motivating dimensions of job enrichment. COSTS/CONS • Plastco needs union approval first before it can make changes to the compensation system and this will take time.9 . boost morale. An effective compensation program can retain and attract qualified employees. Design and implement an optimal reward and compensation strategy to advance Plastco’s corporate strategy and support a new managerial strategy to add the greatest possible value to their organization. including an attractive base salary. • Both human relations and high-involvement managerial strategies are more intrinsically motivating thus resulting in higher morale and better employee performance and greater productivity. pursue a high involvement strategy. BENEFITS/ PROS • By moving away from a top down managerial strategy to alternative managerial strategies which encourage more learning and participatory decision-making. It may have to offer non-monetary rewards to employees instead. Plastco can abandon its current classical managerial strategy and adopt a human relations approach and then perhaps later. • 2. 3. Implementing a Total Rewards Package may cost more and time then the company can afford in the short-term. • This option affords greater staff cross-training. working as part of self-managing teams. i.e. resources. Plastco employees can experience greater autonomy at work. But it is definitely worth striving for if the company recovers a healthy profit margin through restoring the quality of its products and trust with customers. capacity building and workforce retention. Plastco can select an HR Manager from its existing management or supervisory team and then create an HR plan. COSTS/CONS • Plastco may not have the staff expertise. . time and money to switch managerial strategies.14 • Plastco will likely not be offering above market wages to its employees given its constrained financial position. 15 BENEFITS/ PROS . 4. COSTS/CONS • There is no guarantee that senior management will create this new position. BENEFITS/ PROS . COSTS/CONS • The company may not be able to respond in time to the competitive threat it faces and regain the trust of lost customers. Plastco can deliver better products with improved quality and customer service. The company may have to go through an expensive external competition to find one. A total quality management tool like Six Sigma can reduce production costs and improve quality. Plastco's new compensation strategy can improve employee interpersonal relationships. • A new HR manager can proactively manage the company's workforce and help anticipate any major staffing changes and assist with succession planning.10 BENEFITS/ PROS • This is absolutely essential to reassert the company's position in the marketplace and win back its customers. • Plastco may not have sufficient internal candidates capable of doing this job well. 5.16 • An HR manager is a vital management position necessary to revamp company operations for the better. This process can take a long time (4-12 months) depending on the complexity of the changes proposed. Plastco can pay its female employees more and can promote them to higher positions within the company to address pay inequity and avoid the risk of a union grievance. Management can strive to reward top performers to further enhance workforce productivity. Improving interpersonal relationships boosts employee morale leading to improved product quality and quantity. The company can investigate converting its excess waste for reuse at the plant. To address rising environmental attitudes. A new compensation strategy incorporating more intrinsic rewards can lead to more harmonious and satisfied employees. Plastco can develop quality green products to retain its customer base and regain lost customers. • • • • COSTS/CONS • • • • Plastco needs union approval to institute the changes to its compensation system. Alternatively. hours and working conditions must be made in collaboration with the union via a collective bargaining process. Resolving the significant wage difference between Plastco employees can also help boost employee harmony and morale. This is time Plastco may not have given the precarious business situation it finds itself 6. Plastco proposed changes to wages. . BENEFITS/ PROS • • Plastco can replace its current product line with similar bags that are all 100% biodegradable.17 • • This is absolutely essential to reassert the company's position in the marketplace and win back its customers. it can convert it into other marketable plastic products. They would never accept the sudden job loss of its members. BENEFITS/ PROS • This option makes sense if Plastco's revised compensation strategy for its bagmaking department costs more than automating the department. 7. . The union representing the bag-making department’s workers would never accept this option.18 COSTS/CONS • • It will take and money to convert Plastco's production process. COSTS/CONS • • • Overhauling the plant will be expensive and more than what the company can afford right now. This option could trigger a prolonged strike over the automation issue. Plastco can automate its entire bag-making department and thus dispense with the department's compensation costs altogether. The company may be incapable of affording these changes right now given its weakened financial position and that a competitor is quickly gaining market share from Plastco. iv. This recommendation assumes that the union also agrees the launch of a Total Rewards Package is in the best interests of its members. . iii. ii. Plastco should adopt a cost-effective optimal reward system consisting of a total rewards package to support their corporate strategy and promote desired employee behaviour.19 Recommendations Here are 2 or 3 activities offering the best payback & which offer the most bang for buck 1. and at a later date switch to a high involvement managerial strategy. practices. Both result in a more engaged work group and higher morale which leads to better performance and higher productivity. each of which includes programs. A total rewards approach reduces turnover and absenteeism and retains and attracts qualified employees. elements and dimensions that collectively define an organization's strategy to attract. Compensation Benefits (non-monetary) Work-Life Balance Performance and Recognition Development and Career Opportunities Justification for choosing this action Both human relations and high-involvement managerial strategies are more intrinsically motivating than the company's current classical managerial strategy." 11 These elements include i. A comprehensive total rewards package can be designed to incorporate more intrinsic rewards into existing company jobs motivating employees to be more harmonious and satisfied to perform at their best. Furthermore. v. The company should also switch to a human relations strategy. "There are five elements of total rewards. motivate and retain employees. a more engaged workgroup improves the quality and quantity of production and can thus boost profitability and thus pay for the cost for the new compensation program. This will address the pay inequity women face and get the company in compliance employment equity legislation.” 12 3. Plastco can rebuild its profit margin. From a strategic point of view. incentives or salary increases will occur. Plastco should improve the quality of its products via the Six Sigma methodology to regain the trust of its customers and improve profitability. . such as biodegradable plastic bags and new plastic products developed from waste. how bonuses. Such a manager could prepare written guidelines for clarification with respect to all company policies such as “when and how employees are paid. whether they are terminated or voluntarily quit.20 2. Justification for choosing this action By improving the quality of existing products and by developing innovative new ones. customer base and market share to take the lead over its competitors. and all elements that have to do with what happens if an employee leaves the company. Plastco should select an HR Manager from their existing management team. an HR manager can proactively manage the company's workforce and assist with succession planning. Justification for choosing this action The new HR manager should devise an HR Plan and work immediately to retain women in the company as well as promote them to higher positions in the company ranks. skill variety. the company should test the new rewards program for 90 days and make any adjustments it sees fit. 13 A bridging program encompassing both the elements of a fixed wage and intrinsic rewards better can allow employees to get used to a Total Rewards Package. HR should look at hiring better employees that are the right fit for Plastco jobs and the organization as a whole. As part of the development component of the total rewards strategy. Plastco will offer short training programs to improve employee job knowledge and interpersonal skills. Intrinsic rewards offer greater opportunities for employee to feel involved at work. Plastco senior management in consultation with other supervisors and staff will nominate a female employee to the level of a supervisor. They also provide feedback opportunities to boost company operations and employee morale. Thus. The company will monitor progress with respect to the new compensation strategy to ensure the desired:14 • • • Impact on compensation objectives Impact on compensation costs Impact on employee behaviours and attitudes The HR manager will conduct an environmental and SWOT analysis to understand the internal and external position of the company and be ready for any other emerging threats in the marketplace. Job redesign is necessary to reduce turnover rates. it will allow Plastco to make the necessary implementation changes along the way.21 Implementation Plan Short Term (<90days) Plastco can use a bridge program to maintain employee trust and allowing employees to get used to the concept of a total rewards package. Medium Term (3 months – 2 years) Plastco will redesign its employee jobs to contain the 5 intrinsically motivating job dimensions of job enrichment (task identity. In addition. Plastco HR personnel should have the discretion to adjust the plan to ensure that it benefits the employees. the company and customers. job autonomy and job feedback). morale and productivity. task significance. The company's new HR manager will take a proactive stance to clean up all employment equity and employment standards challenges and strive to boost employee relations. The HR manager needs to assess why employees are leaving their positions in order to attract new applicants into the vacated positions. . 15 An audit also ensures compliance with constantly chaining government legislation and regulations to lower litigation risk. This can help to retain employees now that they better understand their job expectations. The new HR manager will constantly scan and survey company operations and staff. the HR manager will: • Develop and implement a proactive employee retention strategy. and Systems in place to measure the desired outcomes upon which employees will be compensated 17 • An alignment with Plastco’s short and long-term goals. procedures. midpoint and maximum dollar values for each position). Job pricing (establish minimum. The new HR manager will conduct an HR audit to review Plastco's current human resources policies. • Promote a more cooperative relationship between management and the union through the following methods: 16 Prior consultation Sincere concern Training programs for both parties Creation of a Joint Management .22 HR personnel will do more to communicate job role and responsibilities to new and existing staff.e. effectively preventing serious problems and crises from happening. Furthermore. recognition or time off). Plastco senior management will reward supervisors for keeping good people with nonfinancial rewards (i. documentation and systems to identify needs for improvement and enhancement of the HR department.Union Compensation Committee The HR department will establish a compensation administration program involving: • • • Job analysis. Job evaluation. Long Term (over 2 years) . He or she should anticipate and solve problems as they arise. • Develop a succession plan to promote from within and attract new talent from outside. This type of financial reward can motivate employees to achieve a specified level of performance and results. providing they have enough employees and profitability to support the purchase.23 The company has now adopted a high involvement managerial strategy. Senior Management in consultation with the HR Manager will consider purchasing an HRIS system to improve Plastco's HR operations efficiency and effectiveness. The entire total rewards package will be fully implemented across Plastco by now making the company a leader in its industry and an employee of choice. Plastco will offer more than base and indirect pay and now begin to offer performance pay to its employees rather simply rewarding more based on seniority. After a lengthy round of collective bargaining with the union. . Performance pay can encourage employees to work at their best and seek greater career advancement further reducing employee turnover. 24 Appendix A: Plastco Departmental Chart Plant Manager Maintenance Department Maintenance Supervisor $?/hr Bag-making Department 1 Bag-making Supervisor $?/hr 6 Bag-making operators All Male earning $24/hr Turnover 1 person/year Mechanics $?/hr via quitting or retiring or 17%/year 4 Utility Workers All Male earning $18/hr 33% Turnover per Year 6 Inspector/ Packers All Female $12/hr High Turnover up to 100% year The red arrow represents the flow of information . 25 Endnotes . 521. http://www.” last modified June 1. Hari Das. http://www.com/topic/implementing-performance-based-compensationsystem. “Design the Right Compensation Plan for your Business. Long. Ontario: Nelson Education Ltd. 10 “What is Total Rewards?” last modified June 1.jsp.ca/Member_Benefits/documents/SMU_sixsigma_rirani. 2013. 9th Ed.worldatwork. 4th. 203. (Toronto. Hari Das. Strategic Compensation in Canada. Ed . 2013.” last modified June 1. 4th.. 75. (Toronto. Ontario: McGraw-Hill Ryerson.Canadian Human Resource Management: A Strategic Approach.. Ontario: Nelson Education Ltd. 27.. “Implementing a Performance-Based Compensation System.cmc-canada.aspx 17 .” last modified June 1. 16 15 Ibid. 2010). 3 4 5 6 “The Four Intrinsic Rewards that Drive Employee Engagement. 103. (Toronto. 7 Richard J.” last modified June 1.. http://www. 11 12 Hermann Schwind. 2010). Ed. http://www.. Ibid.Uay6NkBJPK0. 103.Richard J. and Terry Wagar. and Terry Wagar.. Ed .entrepreneurship.org/en/resource-center/design-the-right-compensation-plan-foryour-business. 2013. 85. 8 9 Ibid. 2010). http://www. 204.204.. 4th.com/topics/the-workplace/the-four-intrinsic-rewardsthat-drive-employee-engagement#.accountingweb..iveybusinessjournal. Ibid..pdf. Ontario: Nelson Education Ltd. 14 Hermann Schwind. Strategic Compensation in Canada. Ontario: McGraw-Hill Ryerson. (Toronto. 483-486.Canadian Human Resource Management: A Strategic Approach. 2013. “Six Sigma – A Quality Initiative. 9th Ed.org/waw/aboutus/html/aboutus-whatis. Long. 2010). 2013. Ibid. Strategic Compensation in Canada. 13 Richard J. 65. (Toronto.. 35.. Long. 1 2 Ibid. Ibid. 2010). http://www. Hari Das. Schwind. World at Work. Plastco's environment is stable and non-complex .entrepreneurship. “Six Sigma – A Quality Initiative. Canadian Human Resource Management: A strategic Approach. Entrepreneurship.. 2013. Case Study Analysis Form Background Information: CURRENT OPERATING ENVIRONMENT Contextual Framework Variables i. 2013. 2010. 2013. Certified Management Consultant. Ed. Strategic Compensation in Canada.ca/Member _Benefits/documents/SMU_sixsigma_rirani.“What is Total Rewards?” Last modified June 1. “Implementing a Performance-Based Compensation System. 2013.org.” Last modified June 1.org/waw/aboutus/html/aboutus-whatis.com/topics/theworkplace/the-four-intrinsic-rewards-that-drive-employeeengagement#. “The Four Intrinsic Rewards that Drive Employee Engagement. Richard J.pdf.. Ninth edition.Bibliography Accounting Web.worldatwork. 4th. http://www. Toronto.org/en/resourcecenter/design-the-right-compensation-plan-for-your-business. 2013.. Ontario: Nelson Education Ltd. 2010.Uay6NkBJPK0. Hermann. and Teri H.cmc-canada.accountingweb.http://www.jsp.com/topic/implementingperformance-based-compensation-system. Toronto: McGraw-Hill. http://www. Ivey Business Journal. Long. “Design the Right Compensation Plan for your Business. http://www.iveybusinessjournal. Wagar. Long.” Last modified June 1.aspx.” Last modified June 1.” Last modified June 1. The Maintenance Department staff ensures the bag-making machines are regularly serviced and kept in proper working order. the company provides 20% indirect compensation in the form of benefits to company employees. Culture & Values & HR Function Competitors: Plastco must contend with an emerging competitor who can produce better quality bags for less. i. morale and significant turnover of its female employees. Plastco is losing market share to this competitor. Competitors. along with strict rules.e.ii. Key elements of the company’s task environment include its customers. the Ministry of Labour and the Provincial Human Rights Commission. Its corporate strategy can be described as a defender and low cost. v. In terms of job design. Managerial Strategy Based on the preceding contextual framework. Employees. The reward system (compensation system) at Plastco is an extrinsic economic reward system directly linked to hours worked. The company wants to dominate the narrow plastic bag market. Benefits increase with seniority. iv. iii. Task Environment/Domain Plastco’s narrow domain is defined by the variety of plastic bags it makes. This department consists of: . motivation. Its technology can be characterized as long-linked. The task of producing Plastco bags is routine. i. It is the bag-making department where Plastco is experiencing poor employee relations coupled with low job satisfaction. The next heading below examines the structural implications of such a strategy Structural Framework Variables Besides the rewards system. Supervisors are quite controlling of their subordinates actions. The processes used to control employee behaviour require external control through supervision. iv. the company has clearly adopted a classical managerial strategy. In addition. Plastco’s unionized workforce is low skilled and of modest income. Employees: The company's non-management employees are unionized and are divided into two departments. Plastco’s bag-making jobs separate thinking from doing and are narrow and fragmented Coordination and departmentation is strict and formalized with a pyramidal hierarchy emphasizing accountability. vi. the bag-making and maintenance departments. punishment and some extrinsic rewards. This structure enables vertical coordination and departmentation by function. ii. competitors. The company produces large batches of identical bags in a standardized way. suppliers and regulatory agencies it must adhere to. these are the levers Plastco employs to produce a desired behaviour from its employees. Communication can be described as formal and vertical and is restricted. iii. Decision-making and leadership at Plastco is limited to a task-oriented autocratic decision making style. and to design and administer the compensation system. mission objectives. However. Low Organizational Identification Negative organizational citizenship behvaiour leads to low employee cooperation. Thus. They have yet to hire or promote from within an HR manager and develop a strategic HR plan linked to the company's vision.• • • • 1 bag-making supervisor at the top. Workers group norms are negatively impacting the bag-making department’s output. and Poor interpersonal relationships are creating divisions among the workers. initiative. 1. customer service. values and culture. There is no HR manager to recruit new and capable staff. The company could also choose to contract out the compensation function to firms who specialize in this area. Low Employee Motivation Negative task behaviour leads to an inability to reach desired performance levels defined by management as well as decreased job effort. which is also not mentioned in the case. it is more feasible to assume that Plastco would create a new HR Manager position to take on this vital function in collaboration with the union. Primary /Root Problems Explain (list from most to least severe) Who is involved? What is their role and responsibility in creating or resolving this issue? Impact on costs. 2 departmental supervisors. the Plant Manager. See Appendix A for full details on the salary. Culture & Values : Classical firms prefer to depend on formal structures and focus very little on organizational culture Human Resources Function: Note: The case assigned does not make any mention of a human resources manager. The last group of workers is the lowest paid at $12/hour and is experiencing almost 100% turnover each year. and no desire from them to demonstrate extra effort.Low Job Satisfaction Negative membership behaviour leads to increased employee turnover. There does not appear to be anyone at Plastco who serves as an HR Generalist to work in concert with the plant managers and two departmental supervisors to motivate employees. It would be cheaper to promote someone within the company to the position of HR manager rather than hiring externally. followed by 6 all male bag-making operators. customer service. Plastco's senior management does not appear to be taking the company's human capital very seriously. it is not clear who bears ultimate responsibility for the successful design and administration of Plastco's compensation system. 4 all male utility workers. Plastco absolutely needs approval from the union representing company workers to institute changes to their compensation system via a collective bargaining process. reporting relationship and flow of information within Plastco’s bag-making department. input from workers and the union representing the workers. or even an HR department operating within Plastco. quality. This responsibility could reside with the owner of the company or its CEO. to work with departmental supervisors to motivate staff. or innovation? Ineffective Compensation System Plastco CEO. and finally 6 all female inspector/ packers. and to go the extra mile.Female employees are not being maximized and there is a near 100% turnover of female employees. . . has led to a loss in customers. If relations continue to deteriorate between management and the staff. the company's productivity and bottom line are suffering. The female workers could very easily file a grievance with their union given they are not rising within their department and often are blamed unfairly for their incompetence by male colleagues. A shift in consumer attitudes to embrace environmentalism has made the future of the plastic bag industry uncertain. 3. Currently. i. market share and profits. customer service. New alternative bags should be developed and sold immediately. with no succession plan in place. A new competitor has emerged offering better quality and cheaper bags. 2. The company is not following employment equity legislation. performance levels have declined resulting in lower productivity and lower quality plastic bags. Plastco needs to develop alternatives which are cost-effective and popular with customers to regain market share and profitability.There does not appear to be a succession plan in place for employees. Production has fallen to minimal levels because there is no real employee communication and coordination between Plastco's two departments Furthermore. Secondary Problems Explain (list from most to least severe) Who is involved? What is their role and responsibility in creating or resolving this issue? Impact on costs. This in turn. Plastco employees are dissatisfied with the rewards they receive Senior management.e.Senior management at Plastco has done nothing to promote its female employees into higher positions within the bag-making department and into the management team. The union has failed to properly represent the female Plastco employees. the maintenance department is not properly servicing the bag-making department's machines resulting in low productivity levels. the company could face a strike only further impairing its productivity and profitability. quality. 100% biodegradable bags. or innovation? 1. or plastic bags manufactured from recycled materials. HR personnel.Plastco's reduced productivity and reduced quality plastic bags have led to increased customer complaints and high levels of waste. Customers are upset with Plastco’s inconsistent product quality and are migrating over to the new competitor.Production has fallen to minimum levels and is adversely affecting profitability. The union could do more to advocate for their career success.The company's management and hr personnel have not prepared a succession plan to promote from within and attract new talent from outside. All company employees are at risk if they find themselves in an industry that has no future. Plastco cannot afford to lose its customers and market share.The company needs to expand beyond its current narrow domain of only manufacturing conventional plastic bags. Since Plastco employees are not happy with their jobs and feel poorly compensated for their work. The time and cost of preparing a succession plan is well worth it. Plastco's unionized employees and their union. The company is at real risk of going under if it does not act quickly to turn its production levels and profits around. Company management. There is poor communication between the two departments. If they feel they are not being heard. They may even decrease their work performance. job and reward satisfaction. Management’s reliance on the classical managerial style is only providing enough rewards to foster a bare minimum employee and employer relationship. Employee relations are so poor that a rift now exists between the two departments. • • Employees perceive an inequity for the rewards they receive for all their hard work. The wage gaps across the bag-making department are creating serious tensions and contributing to employee turnover. Given the extremely high level of female employee turnover. Employees from both departments and employees within the bag-making department.Plastco's classical managerial strategy is suboptimal and creating a host of employee relations and declining performance and profitability problems. The current rewards are not sufficiently motivating staff. Relative Deprivation Plastco female perceive they are worse off compared to their male coworkers. as well as company loyalty. or leave the company altogether. 3. And frankly. they may demand improved job duties. one operator leaves the company every year.Employees wanting to be better compensated may demand better pay at Plastco. interactions and outcomes to be unfair in nature. The company is struggling with the turnover of its inspectors. Continued employee turnover cannot be sustained for much longer. Nearly 100% or almost 6 out of 6 of the female inspector/packers leave the company every year. utility workers and particularly its female inspector/ packers. membership behaviour and organization citizenship are all low. Plastco may be subject to a grievance. Plastco bag-making department’s unionized employees and their union. Within the bag-making department.32 utility workers depart every year. . lower level employees in both departments have to rely on vertical communication up through their supervisors and the plant manager. 33% or 1. Plastco's employees' reward dissatisfaction was caused by a: • Violation of Psychological Contract Plastco employees believe their job efforts are not fairly compensated. and within the bag-making department. Market conditions and customer satisfaction are deteriorating rapidly particularly as a new competitor has emerged on the scene. Currently. Female employees may very well file a grievance with the union or a human rights complaint with the provincial human rights commission. As a result. the real employee motivator is the threat of dismissal. 2.Employee turnover and declining productivity and profits cannot be sustained much longer. Lack of Organizational Justice The bag-making department's employees perceive the company’s procedures. and how complex they are to administer. If employee and labour relations continue to deteriorate. This is impairing their sense of organizational commitment and creating a lack of confidence in management. this solution can motivate employees. company pension plan and stock options to help employees reach their potential at work and at home. the union may push for a grievance and possibly a strike in an attempt to improve working conditions for its members. boost morale. the union may call for a strike and that would be disastrous to company production and profits. Management should also investigate a variety of organizational and workplace innovations to improve employee as well as labour relations. Plastco's management needs approval from the employee union to institute changes to their compensation system via a collective bargaining process. 1. they have clear grounds to file a grievance. 4. Redesign employee jobs to contain the 5 intrinsically motivating dimensions of job enrichment. and promote desired work behaviour. See Appendix A for an illustration of this flow of information. These five dimensions are as follows: o task identity o task significance o skill variety o job autonomy o job feedback • Strive to offer a comprehensive total rewards package. comprehensive health and wellness benefits. An imminent workplace conflict may be brewing between Plastco's management team and its unionized employees If management is not careful. controls compensation costs. • • • • If designed properly. vacation package. including an attractive base salary. The six bag making operators earn $24/hr. Plastco may not be in a position to tie up its management staff for so long even though it may not have a choice. . The length of time depends on the changes proposed. Alternative/ SolutionsPros (Benefits)Cons (Costs)Design and implement an optimal reward and compensation strategy to advance Plastco’s corporate strategy and support a new managerial strategy to add the greatest possible value to their organization. Management should be keen on creating more harmonious relations with the union. Given that women employees are not advancing up the department ranks and their turnover is nearly 100%. and the four utility workers earn $18/hr followed by the six female who only earn $12/hr. Meet employees' intrinsic needs leading to greater work satisfaction and performance. and ensure pay equity. An effective compensation program can retain and attract qualified employees. But collective bargaining takes time. It may take 4 months to a year for the union and company to agree on compensation changes.Communication then flows back down again so that they may finally communicate with each other. Intrinsic needs are the non-financial psychological rewards employees receive by completing meaningful work and doing it well. It may have to offer non-monetary rewards to employees instead. Plastco may not have sufficient internal candidates capable of doing this job well. This method of pay increases with an employee’s tenure. A new HR manager can proactively manage the company's workforce and help anticipate any major staffing changes and assist with succession planning.There is no guarantee that senior management will create this new position. This option affords greater staff cross-training. The company may have to go through an expensive external competition to find one.The company may not be able to respond in time to the competitive threat it faces and regain the trust of lost customers.e. Plastco can select an HR Manager from its existing management or supervisory team and then create an HR plan. 4. • • • . Improving interpersonal relationships boosts employee morale leading to improved product quality and quantity. Plastco can abandon its current classical managerial strategy and adopt a human relations approach and then perhaps later. resources. Plastco will likely not be offering above market wages to its employees given its constrained financial position. This is time it may not have given its current unfortunate position in the marketplace. 3. i. But it is definitely worth striving for if the company recovers a healthy profit margin through restoring the quality of its products and trust with customers. This is absolutely essential to reassert the company's position in the marketplace and win back its customers. Implementing a Total Rewards Package may cost more and time then the company can afford in the shortterm. time and money to switch managerial strategies. working as part of self-managing teams. A new compensation strategy incorporating more intrinsic rewards can lead to more harmonious and satisfied employees. Both human relations and high-involvement managerial strategies are more intrinsically motivating thus resulting in higher morale and better employee performance and greater productivity. Plastco needs union approval before it can implement performance pay which is in opposition to senioritybased pay. pursue a high involvement strategy. • • • By moving away from a top down managerial strategy to alternative managerial strategies which encourage more learning and participatory decision-making. • • An HR manager is a vital management position necessary to revamp company operations for the better.• Plastco needs union approval first before it can make changes to the compensation system and this will take time.Plastco may not have the staff expertise. Plastco employees can experience greater autonomy at work. • • • 2. A total quality management tool like Six Sigma can reduce production costs and improve quality. capacity building and workforce retention. Plastco can pay its female employees more and can promote them to higher positions within the company to address pay inequity and avoid the risk of a union grievance.Plastco's new compensation strategy can improve employee interpersonal relationships.Plastco can deliver better products with improved quality and customer service. practices. The company should also switch to a human relations strategy. Alternatively. A comprehensive total rewards package can be designed to incorporate more intrinsic rewards into existing company jobs motivating employees to be more harmonious and satisfied to perform at their best. This is time Plastco may not have given the precarious business situation it finds itself. ii. Plastco can develop quality green products to retain its customer base and regain lost customers. motivate and retain employees.Plastco can replace its current product line with similar bags that are all 100% biodegradable. This option makes sense if Plastco's revised compensation strategy for its bag-making department costs more than automating the department. Recommendations2 or 3 Activities offering the best payback & which offer the most bang for buck Justification for choosing this action 1. and at a later date switch to a high involvement managerial strategy. it can convert it into other marketable plastic products. This process can take a long time (4-12 months) depending on the complexity of the changes proposed." These elements include i. • • • This option could trigger a prolonged strike over the automation issue. Plastco should adopt a cost-effective optimal reward system consisting of a total rewards package to support their corporate strategy and promote desired employee behaviour. The company may be incapable of affording these changes right now given its weakened financial position and that a competitor is quickly gaining market share from Plastco.Plastco can automate its entire bagmaking department and thus dispense with the department's compensation costs altogether. • 5. each of which includes programs.• • • • • Resolving the significant wage difference between Plastco employees can also help boost employee harmony and morale. iv. The company can investigate converting its excess waste for reuse at the plant. A total . Both result in a more engaged work group and higher morale which leads to better performance and higher productivity. iii. elements and dimensions that collectively define an organization's strategy to attract. They would never accept the sudden job loss of its members. It will take and money to convert Plastco's production process. The union representing the bag-making department’s workers would never accept this option. "There are five elements of total rewards. Plastco proposed changes to wages.To address rising environmental attitudes. Management can strive to reward top performers to further enhance workforce productivity. Overhauling the plant will be expensive and more than what the company can afford right now. hours and working conditions must be made in collaboration with the union via a collective bargaining process. Plastco needs union approval to institute the changes to its compensation system. Compensation Benefits (non-monetary) Work-Life Balance Performance and Recognition Development and Career OpportunitiesBoth human relations and high-involvement managerial strategies are more intrinsically motivating than the company's current classical managerial strategy. ” Plastco should improve the quality of its products via the Six Sigma methodology to regain the trust of its customers and improve profitability. the company should test the new rewards program for 90 days and make any adjustments it sees fit. Furthermore. A bridging program encompassing both the elements of a fixed wage and intrinsic rewards better can allow employees to get used to a Total Rewards Package. The new HR manager should devise an HR Plan and work immediately to retain women in the company as well as promote them to higher positions in the company ranks. Plastco will offer short training programs to improve employee job knowledge and interpersonal skills. such as biodegradable plastic bags and new plastic products developed from waste. whether they are terminated or voluntarily quit. This will address the pay inequity women face and get the company in compliance employment equity legislation. From a strategic point of view. By improving the quality of existing products and by developing innovative new ones. The company will monitor progress with respect to the new compensation strategy to ensure the desired: • • • Impact on compensation objectives Impact on compensation costs Impact on employee behaviours and attitudes . how bonuses. Plastco HR personnel should have the discretion to adjust the plan to ensure that it benefits the employees. incentives or salary increases will occur. Intrinsic rewards offer greater opportunities for employee to feel involved at work. the company and customers. 2. The company's new HR manager will take a proactive stance to clean up all employment equity and employment standards challenges and strive to boost employee relations. customer base and market share to take the lead over its competitors. it will allow Plastco to make the necessary implementation changes along the way.Plastco should select an HR Manager from their existing management team. Thus. an HR manager can proactively manage the company's workforce and assist with succession planning. This recommendation assumes that the union also agrees the launch of a Total Rewards Package is in the best interests of its members. HR should look at hiring better employees that are the right fit for Plastco jobs and the organization as a whole. As part of the development component of the total rewards strategy. Implementation Plan Describe Actions:ResponsibilityTimingResourcesMonitor/Audit Short Term (<90days) Plastco can use a bridge program to maintain employee trust and allowing employees to get used to the concept of a total rewards package. morale and productivity. In addition. a more engaged workgroup improves the quality and quantity of production and can thus boost profitability and thus pay for the cost for the new compensation program. Such a manager could prepare written guidelines for clarification with respect to all company policies such as “when and how employees are paid. and all elements that have to do with what happens if an employee leaves the company. Plastco senior management in consultation with other supervisors and staff will nominate a female employee to the level of a supervisor.rewards approach reduces turnover and absenteeism and retains and attracts qualified employees. Plastco can rebuild its profit margin. They also provide feedback opportunities to boost company operations and employee morale. • Promote a more cooperative relationship between management and the union through the following methods: Prior consultation Sincere concern Training programs for both parties Creation of a Joint Management . Long Term (over 2 years) The company has now adopted a high involvement managerial strategy. documentation and systems to identify needs for improvement and enhancement of the HR department. Performance pay can encourage employees to work at their best and seek greater career advancement further reducing employee turnover. The HR manager needs to assess why employees are leaving their positions in order to attract new applicants into the vacated positions. Job redesign is necessary to reduce turnover rates. providing they have enough employees and profitability to support the purchase.e. He or she should anticipate and solve problems as they arise. This can help to retain employees now that they better understand their job expectations. This type of financial reward can motivate employees to achieve a specified level of performance and results. job autonomy and job feedback). recognition or time off). An audit also ensures compliance with constantly chaining government legislation and regulations to lower litigation risk. task significance. HR personnel will do more to communicate job role and responsibilities to new and existing staff. procedures. Job pricing (establish minimum. • Develop a succession plan to promote from within and attract new talent from outside. Job evaluation. the HR manager will: • Develop and implement a proactive employee retention strategy. Senior Management in consultation with the HR Manager will consider purchasing an HRIS system to improve Plastco's HR operations efficiency and effectiveness. skill variety. effectively preventing serious problems and crises from happening. The entire total rewards package will be fully implemented across Plastco by now making the company a leader in its industry and an employee of choice. midpoint and maximum dollar values for each position). Plastco will offer more than base and indirect pay and now begin to offer performance pay to its employees rather simply rewarding more based on seniority.The HR manager will conduct an environmental and SWOT analysis to understand the internal and external position of the company and be ready for any other emerging threats in the marketplace. The new HR manager will conduct an HR audit to review Plastco's current human resources policies. Furthermore. . Plastco senior management will reward supervisors for keeping good people with non-financial rewards (i. After a lengthy round of collective bargaining with the union. and Systems in place to measure the desired outcomes upon which employees will be compensated An alignment with Plastco’s short and long-term goals. Medium Term (3 months – 2 years) Plastco will redesign its employee jobs to contain the 5 intrinsically motivating job dimensions of job enrichment (task identity. The new HR manager will constantly scan and survey company operations and staff.Union Compensation Committee The HR department will establish a compensation administration program involving: • • • • • Job analysis.
Report "Plastco Compensation Management Case Study"