Mgmt E5100 Zero Wage Increase Again?

Case Study #2: Zero Wage Increase Again?

Steve Gardner

MGMT E-5100

Dr. Gibaldi/Harvard University

        In 2011, Craig faced an all-too-familiar problem in his furniture company. His company is surviving in a deep recession, but there is no leftover money. Every dollar spent needs to be carefully allocated. As owner of a company that has had two years of wage freeze, Craig knows his workers are expecting a raise this year. However money is very tight, and there is no such thing as a "safe" move because there is a large discrepancy between his valued workers and the 10-15% who are dragging the company back. Deep down I think Craig knows things must change, and now is as good a time as any to refine human resource elements of the company. We will examine important details about company culture and individual employees in his company, then discuss some of the relevant theories of motivation. Finally we make recommendations for Craig's specific situation. He needs to figure out how to maximize output and efficiency in his furniture company.

        Craig has a theory Y mindset regarding his workers-- he clearly believes employees are the most valuable resource in his company. With only about 100 workers, it is possible for him to get to know most, if not all of the workers. He has observed that roughly 15% are demotivated individuals who are finding ways to get by with minimal effort. These employees regularly call in sick after long weekends, or ignore customers in need of help. Money is so tight that he would prefer not to spend any more than he has to on these workers. Another 30% are highly motivated and working very hard.  These people truly care about their work and will go the extra mile, even when no one is looking. The rest are good, solid team players. Craig probably realizes these are great numbers. Many small businesses would be delighted to have such an engaged, motivated team. He has likely done an excellent job leading to this point, and as a good owner, realizes this is an important juncture for the company. How much longer will the great employees be willing to shoulder the burden created by those who don't care enough to do their fair share? Any funds spent on wage increase will be taken from other operational expenses and will decrease long-term viability, so each dollar is precious. Craig needs an effective distribution plan.

        In the case study we catch Craig worrying that his worst workers-- the people who are calling in sick just because they don't feel like coming in to work (possibly a group of four or more of them deciding to call in sick and go out together?) or even ignore customers who obviously need their help-- will be upset if they don't receive a pay increase this year, and will even help themselves to company property as a recourse if they don't get "their" raise. To me it is very clear that Craig needs to be more concerned about how much longer his star performers will put up with (and compensate for) the rest of the team. Equity theory tells us these star employees probably are paying attention to the rest of the work force and realize that the pay is similar across the board. They know they are working far more, and are far more important to the success of the company. They should be rewarded accordingly.

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