You are a new HR manager who has been hired to work for a manufacturing company called Smith industrial operations products Incorporated (SIOP), which employees approximately , makes industrial equipment, and has one plant located in connecticut. The company has a small profit margin of 10%. It is located in a small town near many midsize manufacturing facilities.
Background:
The company was started in 1970 by a small group of entrepreneurs engineers who developed a unique high quality machine Assembly product that other manufacturers could not imitate (due to the high quality, the technical know-how, and the complexity of the process required to manufacture the product.). As the company grew it was acquired and sold several times by larger enterprises. Recently, the company was acquired by a small group of foreign investors. During the last acquisition, some of the original managers decided to become investors in the company to take some control of the operation. As a result of all the changes in the business, they have been struggling to build their customer base, as well as recruit employees to regain the momentum they had in the past.
During the past 50 years that the company has been in business, the manufacturing s pool employees decided to continue to work there during these acquisitions some of the original managers said it to become investors in the company take some control of the operation. As a result of the changes in the business, they have been struggling to build their customer base, as well as recruit employees to regain the momentum they had in the past.
During the past 50 years that the company has been in business, the manufacturing site remained in the same 15 mile radius of the original location, and therefore many of the employees decided to continue to work there during these accusations. Some of the employees were laid off and then later were rehired. To encourage them to come back with equal benefits, the company kept their original hire dates. Turn over for the long service employees has been low but turnover for the new employees is very high. There are numerous manufacturing businesses located within a 25 mile radius of the facility and many of these businesses need employees with the same skill set, so the competition for manufacturing labor is fierce.
The plant manager has requested to see you as soon as possible to help him address a compensation issue that he recognized with his machine operators. He indicates in his interview with you that he has a significant problem with a group of machine operators. Specifically, he tells you that he has 28 operators who have service time between 10 to 15 years, and who he believes are underpaid and need an adjustment to their salary. You ask how and why he believes this has occurred. He does not know but says that you need to fix this fast or these employees will leave. You realize that this is a significant issue but need to understand the root cause and don’t feel comfortable just making an adjustment without data and analysis. You ask him to give you time to situate and learn more about the organization and how this happened. You know that giving an adjustment to 28 people out of 200 machine operators would not be a wise solution. From your research and trying to understand how and why this issue has occurred, you discovered the following
1) the minimum wage in Connecticut increases each year. Each year, over the past 4 or 5 years, the minimum wage has gone up approximately 5.0%.
2). Inflation rates have remained steady over the same period with changes each year of only 0.5 to 1.0%
3) machine operators are not on a pay for performance plan. They have not received performance reviews are merit increases.
4) over the past 4 to 5 years but you’re in operators have received three cost of living adjustments. These have ranged from 1.5% to 2% across the board.
5) machine operator output is measured on an individual basis (number of quality parts), but they work in cell teams with other operators. Each operator is expected to be flexible and work on many different types of machines.
6) the job description for a machine operator has not been reviewed or updated in 6 years.
7) there is an eternal pay structure for hourly employees. The pay structure consists of six pay grade levels with small differentials between these levels. The machine operator is the first level of the pay structure. Each level consists of several positions which are valued at the same range. These salaries ranges have not changed for 5 years.
7)the company provides a competitive benefit package consisting of medical, dental, vision, tuition reimbursement, a 401k, time off, and an annual discretionary bonus plan.
Machine operators statistics
Years of service
Less than 2 years – number of machine operators 126 -percentage of machine operators, 63%-average compa ratio. (80% is minimum of salary range 100% equals midpoint/Market of salary range, 120% equals maximum of salary range. 81%-annual turnover,
very high.
Years of service:, 2 to 5 years. Never a machine operators, 20. Percentage of machine operators, 10%. Average, compa -ratio (80 percent is minimum of salary range, 100% equals midpoint Market of salary range, $120% = maximum salary range. 83%. Annual turnover , high.
Years of service, 5 to 10 years. Number of machine operators 0. Percentage of machine operators 0%. Average compo ratio 80% is minimum of salary range 100% equals midpoint of Market Everett salary range 120% equals maximum salary range.n/a, n/a.
Years of service : 10 to 15 years. Number of machine operators 28. Percentage of machine operators, 14%. Average compilation ratio 80% is minimum of salary range, 100% equals midpoint Market of salary range, 120% equals maximum of salary range 85%. Annual turnover, low.
Years of service, over 15 years. Number of machine operators 26. Percentage of machine operators, 13%. Average compilation 80% is minimum of salary range, 100% equals midpoint Market accelerate range, $120% equals maximum salary range, 110%. Annual turnover, low.
Totals in each column are as follows,
Number of machine operators, 200. Percentage of machine operators, 100%. Average compilation 80% is minimum of salary range, 100% is midpoint Market of salary range, 120% equals maximum of salary range. N/a. Annual turnover n/a.
Problem statement:
You have any requested to give and adjustment to 28th machine operators between 10 to 15 years of service. You have researched the root cause of the problem but have not yet presented this to the plant manager or the leadership team.
Answer the following questions:
1 what do you believe has caused the issue with the machine operator pay for the 28 employees that have between 10 and 15 years of service? List and discuss as many as you could think of.
2 what are the key issues that must be addressed in this problem as you think about developing your compensation strategy/plan?
3 what should be done prior to taking any actions.
4 what are the key issues regarding internal equity? What are the key issues regarding the pay structure? Explain each.
5. What competitive market factors affect this company? Why?
6. How can I pay for performance plan help in this situation? What type of plan would work to address the situation and why?
7. As you think about your challenges as a team, what are the implications in the workplace when companies use team-based pay incentives in general?
8. Would you consider using a team-based instead of pay program for the machine operators? Why or why not?
9. What potential solutions would you recommend to the plant manager regarding making any adjustments to the 28 machine operators that have between 10 to 15 years of service now that you have thought through many of the challenges?
10. What are the implications to the business for each solution / recommendation ?
