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MGT 217: Case #1 “Employee Dilemma”

Instructions: 1. Read the case. 2. Answer the questions at the end of the case in a separate paper, your written answer should fill 2 pages minimum, double-spaced 12-point font Times New Roman with one-inch margins, and upload your response on Blackboard by class time on the due date. Case Title: “Employee Dilemma” By: Kate MacMillan Ivey Publishing © 2017 Maggie, the owner of a large hardware, furniture, and building center faced a dilemma regarding how to manage the upcoming wage review process. After two consecutive years of frozen wages, employees were impatient for the financial progress, but there was no spare money in the budget. It was possible to pump savings from the upcoming process improvement initiative into wage increases; however, the owner had limited motivation to channel hard-won funds to underperforming employees. On the other hand, she was eager to reward the people who added value. But a plan that rewarded only some employees could result in an angry backlash. She had to decide if she wanted to divert the savings into compensation and, if so, she needed an effective distribution plan. As store owner Maggie walked up to the service desk, she heard Steven, the floor manager, finishing a phone conversation. Maggie paused at the counter as she listened to the tail end of the interchange. Steven said, “Are you sure you can’t make it in? This is kind of leaving me in a bind, Jay. Yeah, I get it. Okay. Hopefully we’ll see you tomorrow.” Replacing the receiver into the cradle, Steven glanced up, shrugged in response to Maggie’s raised eyebrow, and said, “That was Jay calling in again. He thinks he has the flu.” Maggie rolled her eyes as they both started walking towards the front of the large home, hardware, and building center. Once they were out of earshot of any customers or other staff members, Maggie commented under her breath, “It’s funny how that flu bug always seems to hit Jay the Monday following a long weekend.” Steven nodded, and said, “He’s not the only one. Four other employees called in before him, and I have a feeling there will be a couple more calls from people whose shifts start in the afternoon.” Maggie sighed loudly in exasperation. “What is it about us that makes people think we are dumb, Steven?” She pointed to his freshly-pressed button-up shirt with the company logo embroidered on the left side, and said, “This says the name of the store is “House and Home,” not “’House of the ones-who-will-believe-anything,’ right?” Steven chuckled, but didn’t comment or break stride. This wasn’t the first time he had heard this joke. Maggie continued, “Do they think we’re not going to notice that they miss every Monday after a long weekend? Especially when they come in on the Tuesday talking about the great road trip they had. Is it really that likely that they will catch the flu for one day only every time? Sheesh.”

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Steven laughed as he reached for the buzzing phone in his pocket. After a quick glance at the display, he paused and shoved several pieces of paper into Maggie’s hand. Changing direction, he asked over his shoulder, “Would you mind giving these to Dana at the front for me? They’re about to send out that order for the Arandock project, and I want to check a few things with Dillon in the yard before it goes.” Not waiting for an answer, Steven took off towards the warehouse. Watching Steven’s retreating back, Maggie was impressed once again by the dedication he had to doing things right, even though it had unfortunately interrupted her venting. Somehow he managed to juggle a lot of balls at the same time, very rarely dropping any of them. As one of the owners of House and Home, it was very reassuring for Maggie to have Steven on the job. He was a key employee. Maggie knew a business as big as hers needed employees like Steven. As she made her way to the front of the store, she was able to glimpse only part of the 39,000 square feet devoted to hardware, houseware, and building supplies. An additional 12,000 square feet were filled with home furnishings, leaving 8,000 square feet as warehouse space. No one person could manage the one hundred staff members, the truckloads of inventory, and the annual sales of more than $20 million. Although every employee could make a difference in the success of the establishment, there were certain employees who would be very hard to replace and Steven was one of them. After delivering the papers to Dana and chatting with her a few minutes, Maggie walked towards the kitchen department to check out how the new displays looked. Customers really seemed enthusiastic about the kitchen displays, but they took up a lot of valuable floor space. Maggie wanted to reassure herself that the new ones were as nice as or even better than the old ones. As she came around to the end of an aisle, she noticed James and Celeste, two employees from the flooring department, talking and laughing as they stocked a shelf. She could hear they were talking about a television show that had been on the night before. Part way down the aisle, a customer was looking perplexed as he scanned the upper shelves. Annoyed, but trying not to show it, Maggie smiled as she paused beside James and Celeste and said, “I think you have a customer.” Looking around, they acted as though they hadn’t noticed him before. James mumbled an apology and jumped up to ask him if he needed assistance. Maggie shook her head as she walked away. She though, “We have trained our employees to make customer service a priority, yet those two acted like that customer was invisible. Why will certain employees not do the right thing unless someone is standing over them? And why do they think I would be so gullible as to believe they hadn’t seen him?” Before she could find an answer to this question, Maggie was distracted by the sight of the new kitchen displays. They looked very impressive and she stopped to congratulate the kitchen designer for her good work. Glancing at her watch, Maggie realized it was almost time for her meeting with Juan, the company controller. As she excused herself and started heading towards Juan’s back office, Maggie thought about the reason for this meeting and felt a little nervousness in her stomach. She had asked Juan to figure out if there was any money for wage increases this year. Maggie knew enough about the balance sheet to suspect the news would not be good.

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House and Home had experienced a decrease in sales the past few years, at a rate of almost $4 million dollars a year. Profit margins had tightened or disappeared in several areas. Employees had seemed to understand why there had been no raises for the past two years. However, Maggie felt it would be hard to sell a zero percent increase for the third year in a row. As usual, Juan was behind his desk with a spreadsheet open on his computer and a cup of coffee half- forgotten amongst the many papers on his desk. With the company for over six years, Juan adeptly handled many of the accounting and human resource issues, freeing up Maggie to spend more time out on the floor troubleshooting. He smiled as Maggie came in and said, “Hey, you’re right on time. Grab a seat. I’m just printing out a little report for our meeting.” The printer behind him started to whirr, and Juan rolled over in his chair to pull two sheets as they emerged. Rubbing his eyes as he handed one to Maggie, he said, “You asked me if I could find any money for raises this year. Well, I’ve gone over the latest numbers and the quick answer, I’m afraid, is no.” Juan waited a moment to let Maggie scan the sheet before he continued. “As you know, sales have been down, and we’ve written off some old inventory this year, and there have been a few unexpected expenses that have really cut into profits. I’ve laid it out in broad brush strokes in this table. I don’t think any of it will be surprising to you.” Maggie exhaled loudly as she began to go through each line with Juan. She was surprised by how disappointed she was feeling. Listening to Juan as she walked him through the numbers, Maggie let part of her brain consider why she felt such disquiet at the idea of another year with no increases. What was she afraid would happen? A mutiny? A mass exodus? Sabotage? The sound of the printer running again made Maggie realize that she had not been giving the conversation enough attention. She said, “I’m sorry, Juan. I didn’t catch that. What was that last part?” As he handed Maggie another sheet, Juan replied, “I was saying that the first sheet it a fair accounting of the business. There aren’t more than a few thousand spare dollars to go towards raises. However, there may be some ways we can ‘find’ some money in there.” Maggie cleared her throat and asked, “Legally?” Juan rolled his eyes and said: “Of course. I wouldn’t recommend anything the auditors would pull apart. I’m just saying that if we change what we’re spending money on, we might be able to divert some towards a wage increase. For example, I’ve heard you say that we’re not getting much of a return from our advertising spending. We could ‘save’ some money there. Or there may be room to reduce our inventory even further. Of course, you may decide that savings made by process improvements should go to things other than wages. If we do find some money, there are many other places in this company where you could invest it. For example, we could use a better security system. Or we could pay down some of our debt. Or we could do some overdue building maintenance to ensure we look good for the customers. It’s a tough decision. You think about it.”

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Maggie looked at the second sheet with interest. Juan had listed a number of different areas where they could cut expenses or save some money. Some of them had been raised before, but they had never been presented in such a detailed fashion. Beside each he had given an estimate of the dollar amounts that could be saved. If they were able to implement all of these ideas, there would be enough money to give all employees maybe a 2.5 to 3.0 percent increase. This was a little higher than the annual inflation rate. This type of increase would not make up for the two years of zero increases, but it would be a movement in the right direction. Maggie waited for a sense of relief to wash over her, but for some reason, she did not feel as excited about this news as she had expected. This didn’t even make sense. She had been so disappointed the moment before when she thought there was no chance. Juan had given her an opening to make this raise happen. Knowing that Juan had put a lot of work into this idea, Maggie made an effort to show some enthusiasm and to thank Juan for his creative thinking. However, she ended the meeting shortly afterwards with an assurance that she would think about everything Juan and presented. Maggie needed to let her thoughts settle down before she could sort them out. Walking back onto the floor, Maggie decided that some fresh air might do her some good. She headed outside to the side yard where the lumber, drywall, and other large materials were transferred directly to the customers or to the delivery trucks. She scanned the yard for Dillon, the yard foreman. An eight-year employee, Dillon had the responsibility to keep the yard organized and safe. When things got sloppy in the yard, accidents increased, people were more likely to get hurt, and inventory was more likely to be lost or damaged. Like Steven the floor manager inside, Dillon was always ready to step up and make sure things were done correctly. Dillon was in the far end of the yard speaking to a young man on a forklift. As Maggie walked closer, she could hear them discussing the best way to prep large customer orders. Instead of interrupting, Maggie paused to straighten out a pile of lumber that a customer had just finished picking through. At the sound of the forklift moving off, Maggie looked up to see Dillon watching her work while leaning against a skid of siding. With a smirk, Maggie asked, “You enjoying yourself over there?” Dillon nodded but stepped over to pick up a few boards that had fallen to the ground. Placing them back with the others, Dillon said, “Hey, it’s not every day that I get to see you actually working.” Looking at the neat pile with satisfaction, Maggie straightened out her back and replied, “From what I can see, that young kid is doing most of the work out here.” Dillon laughed out loud and sound “Ouch! But good catch, Maggie. Tony is doing a lot out here. I wish I had 10 more like him. He just brought me another great idea for doing things better. He has only been here for two months, and he already seems to understand how everything should flow together. There are guys who have been here for five years who can’t’ do that.” As Dillon talked, they watched Tony expertly maneuver the forklift as he picked up an order of drywall for a contractor.

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Looking back at Maggie, Dillon said, “Hey, I don’t think you came out here to pick up boards or talk about Tony. Did you need me to do something?” Maggie shook her head and replied, “Nah. Just hanging out. Maybe I’m wondering if I could leave my problems inside and get a job with you cleaning up the yard. Seems like it would be a lot less stressful, and I could get lots of fresh air. What do you say?” Dillon laughed again, and replied as he looked down at his phone, “Sorry, no openings. You don’t really want to work here anyway. Tony would just make you look bad! Gotta go.” Dillon turned away to sort out a delivery problem that was holding up a job on the other side of town, and Maggie found herself on her own again. Realizing the answers she sought were not in the yard, Maggie wandered back to her office. Shutting the door, she turned off her phone and sat back in her leather office chair so she could try again to straighten out her thinking like she had straightened up the pile of lumber. Pulling out a blank notepad, Maggie wrote down the thoughts that were rolling around her head. She knew it was probably unreasonable to ask her employees to accept a wage freeze for the third year in a row. A subgroup of employees had already seemed to dislike their jobs and it was scary to imagine how hard they would be to deal with if their morale level sunk even lower. There were already issues with “lost” inventory—perhaps the employee theft problem would skyrocket if there was no wage increase. Employees who felt cheated might feel entitled to help themselves to a different sort of raise. The store was full of items that most people would want—it would be easy for a disgruntled employee to smuggle some of the smaller items out of the store in lieu of a raise. The ideas for cost savings given by Juan could probably be accomplished, but it would be a lot of work. Thinking about the time and effort that would be necessary to make it happen, Maggie wasn’t sure if she wanted it bad enough. She already worked long hours, six days a week. If she was honest with herself, she had to admit that she was not particularly motivated to find a way to give raises to some of her employees. There were certain employees who didn’t even seem to earn the money they were already making. It was hard to justify giving them even more money. Maggie realized that at least 15 percent of her employees would probably save the company money if they left. There were people like Jay who were unreliable, dishonest, incompetent, or always in the middle of the latest workplace drama. It was hard to get motivated to work extra hours for months on end to reward this behavior. Of course, there were twice as many really good employees like Tony. These were employees that cared about their work and went that extra mile, even when on one was watching. They were the lifeblood of the business. They should be recognized. At the very top of this pile sat Juan the controller, Steven the floor manager, and Dillon the foreman. Maggie jotted down a note that it was imperative to show at least these three that they were really appreciated. She also knew that giving a raise to only some people and not others could create new problems.

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Case Study 1 Instructions “Employee Dilemma” Case Study

After reading the case study, you will write a two-page double-spaced minimum (12-point font, Times New Roman, 1-inch margins) paper. THIS PAPER MUST BE UPLOADED ELECTRONICALLY TO BLACKBOARD BY CLASS TIME ON THE DUE DATE. Please answer the following questions in your paper. 1. What outcomes does Maggie seem to want to achieve by addressing wages? In other words, what are her goals? 2. Besides wages, what else could Maggie do to increase organizational commitment and job satisfaction among her lower-performing employees? 3. As a consultant to Maggie, would you advise her to give a raise to all, to none, or to the deserving minority? Explain your reasoning. 4. Imagine yourself as a high-performing employee at House and Home. As a high-performing employee, how would you feel if only high-performing employees received raises? Conversely, how would you feel if all employees received a raise? Why? 5. Thinking about your answer to the previous question, do you think your answer is in line with equity theory? According to equity theory, how would high-performing employees feel if only they received raises versus if everyone received raises?