A Zero Wage Increase Again?
(5 pages of text)
The owner of a large hardware, furniture, and building centre faced a dilemma regarding how to manage the upcoming wage review process. After two consecutive years of frozen wages, employees were impatient for financial progress, but there was no extra money in the budget. It was possible to pump savings from upcoming process improvement initiatives into wage increases. However, the owner had limited motivation to channel hard-won funds to underperforming employees. On the other hand, he was eager to reward the people who added value. Yet a plan that rewarded only some employees could result in an angry backlash. He had to decide if he wanted to divert the savings into compensation and, if so, he needed an effective distribution plan.
This case will help both undergraduate and graduate students improve their understanding of several important aspects of employee motivation and compensation management.
- Managers and employees develop an implied contract with each other regarding obligations. The repercussions when the contract is violated can be significant. When employees do not complete their duties or when the organization does not acknowledge the effort of an employee, as in this situation, the contract can be threatened. This case helps students explore the ramifications for both types of contract breach (organization to employee and employee to organization).
- Employees judge an organization in terms of both distributive and procedural justice. This case challenges students to design processes that maximize these justice perceptions.
- Managerial decision making is prone to strong emotional considerations. Managers strive towards their own perceptions of organizational justice. Although there is much prescriptive advice on how to manage businesses, little is devoted to managing the social aspect of policy development and implementation. This case explores some of the limitations that can affect the decision-making process, including bounded rationality.
- Although wage reviews generally occur on an annual basis, the performance considerations in a company play a role throughout the year. This case encourages students to take a broader view. A systematic approach to performance management will help an organization think through performance improvement strategies on an on-going basis, rather than at restricted points in time.
Canada, Medium, 2011
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